bank account just got refilled.
Confirming rumors that swirled ahead of the tape, Dynegy announced Wednesday that it has secured $1.66 billion worth of new financing to help carry the company through 2005. Dynegy CEO Bruce Williamson declared the financing package a major breakthrough for a company that many had already written off as a failure.
"Today's announcement is more than a significant milestone that solidifies our ability to serve and deliver value to our stakeholders for the long-term," Williamson said in a press release issued after the preliminary deal had already flashed up on
screens a day earlier. "These bank facilities represent the defining point where we transition from building a new Dynegy to operating as the new Dynegy."
Unlike bondholders -- who bid up Dynegy's debt ahead of the announcement -- shareholders seemed less willing to celebrate. The stock actually dropped 29 cents, or 10%, to $2.59 as investors pored over the details.
The new financing includes a $1.1 billion revolving credit line and two secured term loans totaling $560 million, none of which require amortization or principal payments before their maturity dates in 2005. But that financing comes at a price, of course. Dynegy estimates that it will pay between $450 million and $465 million in interest this year alone. Prior to the deal, the company was forecasting 2003 interest payments of $417 million.
To land the fresh funds, Dynegy pledged most of its available assets and stock in its subsidiaries as collateral. The company also agreed to adhere to financial covenants requiring minimum liquidity of $200 million and limitations on both debt ratios and capital expenditures.
Williamson deemed the terms "acceptable." And even some long-time critics of the company were willing to embrace the deal.
"The risk of bankruptcy has gone down considerably," said a former short-seller who bought stock in anticipation of the financing.
Christopher Edmonds, an energy fund manager and columnist for
, said he "saw the writing on the wall" for Dynegy's deal after
landed an even bigger financing package earlier this week. Reliant managed to ink a life-saving $6.2 billion financing package even after getting hammered by federal regulators last Wednesday.
"This is as big as the Reliant deal," Edmonds said. "It's clear that the banks have decided to get these deals done."
Unlike Dynegy, Reliant surged on its financing deal. Reliant's stock had another strong day on Wednesday, jumping 29 cents to $4.35. Still, both stocks sell for a mere fraction of what they commanded before the industrywide meltdown began heating up one year ago.