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Dynegy’s $300M LC Tackles Price Hikes
06-25-2008 | Source: Power Finance & Risk - Click here to take out a FREE Trial
People & Companies in the News style="">
style="">Dynegy Holdings closed on a new, $300 million unsecured bilateral contingent letter of
credit
facility
last
week,
anticipating
potential
rising
natural
gas
prices
next
year.
"You
can
point
to
the
rising
commodity
price
environment.
We
saw
that
and
thought
we
should
get
ahead
of
that,"
says
Rick
Evans,
v.p.
of
finance
and
assistant
treasurer
in
Houston.
"It'll
give
us
a
chance
to
pursue
additional
commercial
opportunities
that
we
might
not
otherwise
have
been
able
to
pursue."
style="">
style="">The LC, which accrues interest at 3.2% annually, becomes available if the
price
of
natural
gas
next
year
rises
above
$13
per
MMBtu
and
provides
$40
million
for
each
dollar
increase
over
that.
"It's
a
contingent
facility,
so
if
prices
rise
then
it
kicks
in,"
says
Evans,
adding,
"Our
objective
was
to
have
something
in
place
that
would
deliver
incremental
liquidity
in
that
scenario."
He
declined
to
comment
on
how
the
company
decided
on
the
strike
price,
but
the
spot
price
of
natural
gas
has
risen
from
below
$10
per
MMBtu
in
February
to
over
$12
this
month,
according
to
the
U.S.
Department
of
Energy's
Energy
Information
Administration.
style="">
style="">Morgan Stanley Capital Group is arranger, lender, issuer and collateral agent
on
the
LC,
which
will
fully
amortize
by
March
20,
2010.
"They
had
a
fairly
well
developed
financial
product
that
best
fit
our
needs
that
we
were
looking
to
do,"
says
Evans.
At
the
end
of
March,
Dynegy Holdings had
$5.9
billion
in
long-term
debt.
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