UPDATE 1-Dynegy Holdings files for plan of reorganization

Thu Dec 1, 2011 11:50pm EST

Dec 1 (Reuters) - Dynegy Inc said it has joined its unit Dynegy Holdings in filing a proposed plan of reorganization with a U.S. bankruptcy court that lays out a path for the bankrupt unit's emergence from Chapter 11 in 2012.

Dynegy Holdings, a unit of energy producer Dynegy Inc, filed for Chapter 11 bankruptcy in November to restructure expensive leases on power plants and lighten its debt load.

Dynegy Inc, whose shareholders include billionaire investor Carl Icahn and investment firm Seneca Capital, and its other subsidiaries have not filed for bankruptcy.

The reorganization plan would replace $3.4 billion in senior notes, $200 million in subordinated notes, $130 million in accrued interest and lease payments on the two power plants.

In exchange, the company would offer $400 million in cash, $1 billion in new 11-percent notes due 2018 secured by equity in the company's coal and gas-fueled generating businesses and $2.1 billion in new convertible preferred stock that would convert at the end of 2015.

Dynegy will have the right to redeem the convertible preferred stock at varying discounts through the end of 2013.

The plan and the accompanying disclosure statement have not been approved by the bankruptcy court and are subject to further negotiations with stakeholders, Dynegy said.

Once the plan is approved by the court, Dynegy Holdings will begin soliciting its creditors for the approval, the company said.

The bankruptcy of Dynegy Holdings has turned the usual order of payment for creditors upside down, as the power company tries to protect shareholders like billionaire financier Carl Icahn at the expense of bondholders.

The case is In re: Dynegy Holdings LLC et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-38111.