--Dynegy examiner has 60 days to investigate prebankruptcy
restructuring
--Judge will decide on subpoena requests at Jan. 26 hearing
--Examiner doesn't want Dynegy claiming information is
"privileged"
(Adds no comment from Lazard or White & Case in seventh
paragraph)
By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW
The examiner appointed to investigate Dynegy Holdings LLC's
prebankruptcy financial changes wants to subpoena Dynegy and
company advisers Lazard Ltd. (LAZ) and White & Case LLP over
their roles in the restructuring of the power provider's balance
sheet before it filed for Chapter 11 last year.
In a Monday filing with U.S. Bankruptcy Court in Poughkeepsie,
N.Y., court-appointed examiner Susheel Kirpalani said he wants a
judge's permission to issue subpoenas to any party pertinent to his
investigation, including third parties. Kirpalani, who was
officially appointed on Jan. 12 and has 60 days from that date to
complete his investigation, said he also wants documents from
Dynegy Holdings and its parent company, Dynegy Inc. (DYN), which
isn't in bankruptcy.
After that initial 60 days, additional time can be added, but
only with court approval.
Kirpalani said he doesn't want Dynegy to assert that certain
documents are "privileged," and wants Judge Cecilia G. Morris to
rule at a Jan. 26 hearing that Dynegy and its affiliates "cannot
assert privilege as a basis to deny" production of documents.
At a December hearing approving the examiner, Morris said, "This
examiner will have unfettered access to all documents requested,"
adding that creditors could not "tag along" in the
investigation.
Kirpalani, of Quinn Emanuel Urquhart & Sullivan LLP, said
that once he has the information he needs from Dynegy, he "will
then begin pursuing discovery against third-parties whose
involvement in the transactions under investigation becomes
apparent."
A spokeswomen for Dynegy didn't immediately have a comment. A
spokeswoman for Lazard declined to comment, as did a spokesman for
White & Case.
A group of bondholders led by bondholder trustee U.S. Bank had
asked for the examiner to investigate a transfer of assets by
Dynegy Inc. before the Chapter 11 filing. The bondholders said
those transferred were designed to keep the assets out of the reach
of certain creditors. Hedge-fund manager David Tepper's Appaloosa
Management LP also called for the examiner.
The September asset transfers capped a series of transactions
that reshuffled the structure and location of Dynegy's assets.
Bondholders have sued Dynegy in state court, claiming the
transfers were designed to shield shareholders--including a fund
controlled by Carl Icahn--from a bankruptcy at the expense of
bondholders.
Public Service Enterprise Group Inc. (PEG) had also sued Dynegy,
but Morris last month approved a settlement between the two parties
that allowed Dynegy to reject its money-losing leases at two
upstate New York power plants. PSE&G then dropped its suit.
In November, Dynegy Holdings and four subsidiaries filed for
bankruptcy after senior bondholders, owed more than $1.4 billion,
signed off on a restructuring deal.
The restructuring deal calls for the bondholders to trade in $4
billion in unsecured debt for $400 million in cash, $1 billion in
new secured notes and $2.1 billion in convertible notes. In return,
Dynegy must be out of bankruptcy by August.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Joseph Checkler; Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com