R
EDACTED
V
ERSION
1
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------------x
In re: : Chapter 11: Case No. 11-38111 (CGM)DYNEGY HOLDINGS, LLC, et al., : Jointly Administered:Debtors. :
------------------------------------------------------------------------x
REPORT OF SUSHEEL KIRPALANI, EXAMINER Q
UINN
E
MANUEL
U
RQUHART
&
S
ULLIVAN
,
LLP
51 Madison Avenue, 22nd Floor New York, New York 10010865 South Figueroa Street, 10th Floor Los Angeles, California 9001750 California Street, 22nd Floor San Francisco, California 94111
Counsel to Examiner
March 9, 2012
1
Filed under seal pursuant to the Order Granting the Motion of U.S. Bank NationalAssociation, as Indenture Trustee, for Appointment of an Examiner Pursuant to Section1104(c) of the Bankruptcy Code [Docket No. 276].
11-38111-cgm Doc 490 Filed 03/09/12 Entered 03/09/12 11:51:40 Main DocumentPg 1 of 173
TABLE OF CONTENTS
Page
I.
EXECUTIVE SUMMARY OF THE EXAMINER’S CONCLUSIONS ....................................1
A.
E
XAMINER
A
PPOINTMENT
A
ND
M
ANDATE
...............................................................1
B.
S
UMMARY
O
F
F
INDINGS
A
ND
C
ONCLUSIONS
...........................................................1
C.
B
ASES
F
OR
F
INDINGS
A
ND
C
ONCLUSIONS
................................................................5
1.
P
OTENTIAL
A
CTUAL
A
ND
C
ONSTRUCTIVE
F
RAUDULENT
T
RANSFERS
..........5
2.
C
ONDUCT
O
F
D
EBTORS
I
N
C
ONNECTION
W
ITH
P
REPETITION
R
ESTRUCTURING
...........................................................................................8
3.
W
HETHER
D
YNEGY
H
OLDINGS
I
S
C
APABLE
O
F
C
ONFIRMING
A
C
HAPTER
11
P
LAN
......................................................................................10
II.
PROCEDURAL BACKGROUND...........................................................................................11
A.
C
OMMENCEMENT
O
F
C
HAPTER
11
C
ASES
..............................................................11
B.
E
XAMINER
M
OTION
,
O
RDER
,
AND
A
PPOINTMENT
...................................................11
C.
E
XAMINER
’
S
W
ORK
P
LAN
......................................................................................13
D.
T
OPICS
E
XCLUDED
F
ROM
T
HIS
R
EPORT
..................................................................14
E.
R
ETENTION
O
F
P
ROFESSIONALS
.............................................................................15
F.
R
ULE
2004
M
OTION
A
ND
R
EQUEST
F
OR
P
RIVILEGED
D
OCUMENTS
.......................16
G.
D
ISCOVERY
C
ONDUCTED
I
N
F
URTHERANCE
O
F
I
NVESTIGATION
............................17
H.
M
EDIATION
.............................................................................................................18
I.
C
ONFIDENTIALITY
I
SSUES
R
ELATING
T
O
R
EPORT
P
REPARATION
............................19
III.
RELEVANT FACTUAL BACKGROUND AND FINDINGS ..............................................19
A.
D
YNEGY
O
PERATIONAL
H
ISTORY
A
ND
B
USINESS
L
INES
........................................19
B.
P
RE
-R
ESTRUCTURING
C
APITAL
S
TRUCTURE
A
ND
S
IGNIFICANT
I
NDEBTEDNESS
........................................................................................................21
1.
D
YNEGY
I
NC
. ..............................................................................................21
2.
D
YNEGY
H
OLDINGS
....................................................................................22
11-38111-cgm Doc 490 Filed 03/09/12 Entered 03/09/12 11:51:40 Main DocumentPg 2 of 173
ii
C.
T
HE
B
LACKSTONE
A
ND
I
CAHN
A
TTEMPTS
T
O
A
CQUIRE
D
YNEGY
I
NC
. ..................26
D.
B
OARDS OF
D
IRECTORS OF
D
YNEGY
I
NC
.
AND
D
YNEGY HOLDINGS
........................27
E.
N
EW
M
ANAGEMENT
T
EAM
J
OINS
D
YNEGY
.............................................................30
F.
D
YNEGY
D
ECIDES
T
O
P
URSUE
P
REPETITION
R
ESTRUCTURING
...............................32
1.
A
RCHITECTS
O
F
R
ESTRUCTURING
..............................................................32
2.
I
MPENDING
D
EFAULT
U
NDER
O
LD
C
REDIT
F
ACILITY
.................................33
3.
I
NITIAL
O
UTLINE
O
F
R
ESTRUCTURING
I
NITIATIVES
....................................33
4.
R
ETENTION
O
F
R
ESTRUCTURING
A
DVISORS
...............................................35
G.
R
EFINEMENT
O
F
R
ESTRUCTURING
P
LAN
................................................................39
1.
P
RELIMINARY
A
CTION
P
LANS
.....................................................................39
2.
D
YNEGY
I
NC
.
B
OARD
O
F
D
IRECTORS
A
ND
FRC
D
ELIBERATIONS
..............42
3.
S
EPARATION OF
C
OAL
C
O
T
RANSFER
F
ROM THE
A
UGUST
R
EFINANCING
;
O
RIGINS OF
U
NDERTAKING
.................................................48
4.
D
YNEGY
A
NNOUNCES
I
NTENT
T
O
P
URSUE
P
REPETITION
R
ESTRUCTURING
O
N
J
ULY
10,
2011 ...........................................................49
5.
C
REATION
O
F
D
YNEGY
G
AS
I
NVESTMENTS
O
N
A
UGUST
1,
2011 ...............50
6.
A
UGUST
4,
2011
D
YNEGY
I
NC
.
B
OARD
M
EETING
.......................................53
7.
L
ACK
O
F
D
ELIBERATIONS
B
Y
D
YNEGY
H
OLDINGS
....................................53
H.
P
HASE
1:
R
ING
-F
ENCE
O
PERATING
A
SSETS AND
R
EFINANCE
O
LD
C
REDIT
F
ACILITY
.................................................................................................................54
1.
S
ELECTION
O
F
L
EAD
A
RRANGERS
..............................................................54
2.
I
MPORTANCE OF
V
ALUE OF
C
OAL
C
O
..........................................................55
3.
L
OAN
S
YNDICATION
E
FFORTS
A
ND
L
ENDER
R
EACTIONS
...........................56
4.
S
OLVENCY
R
EPRESENTATIONS
...................................................................58
5.
S
PECIFIC
S
TEPS
I
N
R
ING
-F
ENCING
T
RANSACTION
......................................59
6.
S
OURCES
A
ND
U
SES
O
F
A
UGUST
R
EFINANCING
.........................................68
11-38111-cgm Doc 490 Filed 03/09/12 Entered 03/09/12 11:51:40 Main DocumentPg 3 of 173
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