Dynegy to Refinance ChevronTexaco Debt
ChevronTexaco Corp. and troubled energy firm Dynegy Inc. announced a restructuring deal Tuesday that would help ease Dynegy’s debt woes and allow the oil company to recoup some cash from its investment in the firm.
Under the tentative agreement, which was part of a wide-ranging debt restructuring plan unveiled by Dynegy, the Houston-based power and gas company would refinance $1.5 billion in convertible preferred shares held by ChevronTexaco since late 2001.
San Ramon, Calif.-based ChevronTexaco would receive $225 million in cash, $225 million in new junior unsecured subordinated notes, and $400 million in new convertible preferred stock. The $850-million total value represents about 57 cents for each dollar in preferred stock owned by ChevronTexaco, but it’s well above the $300-million value the company assigned to those shares on March 31.
ChevronTexaco also owns common stock in Dynegy that was valued at $70 million at the end of the first quarter.
“Anything they get back from [the Dynegy investment] is more than I was expecting,” said Sean Sexton, an oil company analyst with Fitch Ratings. “But Chevron’s a big company, so it won’t have much impact.”
For Dynegy, the deal would remove a looming payment due to ChevronTexaco in November and ease the company’s short-term debt burden. The pact with ChevronTexaco, however, is contingent upon gaining approvals from Dynegy’s board, the company’s bank, ChevronTexaco’s internal management and other factors.
Dynegy’s other proposed debt moves include repurchasing $650 million in bonds due in 2005 and 2006 and paying down $1.66 billion in loans. The company will issue an estimated $1.2 billion in senior notes and $300 million in convertible debentures to fund the restructuring plan, according to Dynegy.
Dynegy, which owns power plants, gas processing plants and electric transmission and distribution lines, fell into financial trouble when its highflying energy marketing and trading business disintegrated after Enron Corp. fell apart and the wholesale energy market collapsed.
Some traders at the company have been accused of trying to manipulate natural gas prices.
ChevronTexaco shares fell 83 cents to $71.36, while Dynegy shares rose 11 cents to $4.55. Both trade on the New York Stock Exchange.
ChevronTexaco also announced Tuesday that it would sell its interest in three North Sea oil fields that have a combined production rate equal to about 21,500 barrels per day of oil and gas.
