By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW
Dynegy Holdings LLC said a hedge-fund manager's demand for
public access to a scathing examiner's report into the company's
prebankruptcy dealings should be denied, partly because there's no
evidence Dynegy intentionally committed any kind of fraud.
In a Tuesday filing with the U.S. Bankruptcy Court in
Poughkeepsie, N.Y., Dynegy Holdings said that it has already
offered the hedge-fund manager, Claren Road Asset Management, the
confidential portions of the report related to the transfer of coal
assets to parent Dynegy Inc. (DYN).
All Claren Road has to do to get those, Dynegy said, is agree to
keep them confidential. Claren Road has yet to respond to that
request, Dynegy said.
Dynegy's filing gives little credence to Claren Road's most
recent argument that the First Amendment of the U.S. Constitution
justifies public access to court-appointed examiner Susheel
Kirpalani's report.
"Claren Road fails to set forth the relevant standards
established ... to evaluate whether public access should be granted
to materials ... which were submitted under previously agreed-upon
and court-approved confidentiality protections," Dynegy lawyers
said in their filing.
A spokeswoman for Carlyle Group LP (CG), which owns Claren Road,
didn't immediately return a call seeking comment.
Judge Cecilia G. Morris will hear arguments on the matter this
Friday. The argument was originally set for last week, but Morris
said she wanted the parties to make more filings after Claren Road
raised the constitutional issue. Dynegy Inc. also made a Tuesday
filing asking Morris to deny Claren Road's request.
Claren Road has argued that the report should be made available
in its entirety instead of in its current form, in which 94 of the
149 pages are redacted. Claren Road lawyers had said in early April
court papers that Dynegy's assertion that attorney-client and
attorney-work privileges justified the redactions are superseded by
the "crime-fraud" exception. They later made the First Amendment
argument.
Kirpalani's report, released in March, denounced Dynegy's
transfer of the coal assets before its bankruptcy proceedings to
Dynegy Inc. His findings threw Dynegy Holdings' already contentious
case into more disarray but, after mediation sessions with
Kirpalani himself, the company last month disclosed a deal with
most objecting groups to shift the coal assets back to
creditors.
The settlement, which was disclosed in early April but detailed
in court filings earlier this month, still needs to be voted on by
creditors and approved by Morris. It includes a deal with a unit of
U.S. Bancorp (USB), the representative of holders of bonds secured
by leases of Dynegy's power plants. U.S. Bank had previously sued
over the asset transfers but has agreed to drop that suit.
Under terms of the compromise with some groups of disgruntled
creditors, the holding company's unsecured creditors would get a
99% stake in the parent company. Current shareholders initially
would receive 1%, plus warrants to potentially boost their stake to
13.5% over five years.
Dynegy Holdings and four subsidiaries filed for Chapter 11
bankruptcy protection in November after senior bondholders, owed
more than $1.4 billion, signed off on a since-scrapped
restructuring deal that called for unsecured noteholders owed about
$4 billion to share $400 million in cash, $2.1 billion in new
convertible preferred stock and $1.015 billion in new senior
notes.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com.)
-By Joseph Checkler, Dow Jones Daily Bankruptcy Review;
212-416-2152; joseph.checkler@dowjones.com; Twitter:
@JoeCheckler