Dynergy Shares Drop Then Jump

Nov 8, 2011
J. Webster
Comments Off on Dynergy Shares Drop Then Jump

It’s been a very eventful past few days if you’re a Dynergy shareholder, a wild ride as they say. First Dynergy announced they were filing for bankruptcy. Then it announced that in rare case for shareholders, the bondholders would suffer instead, taken the brunt of the losses.

Dynergy is an electric company that produces energy from coal rather than natural gas, which is cheaper, so they’ve been struggling of late. This is the type of chart that will scare you if you are long or short Dynergy shares. The stock went from $3.30 to $2.67 and then shot up to $3.80 in less than a full trading day. Hope everyone is OK who was involved with Dynergy’s stock this week.

Here are the full details of Dynergy’s bankruptcy from Reuters:

Shares of energy producer Dynegy Inc rose almost 28 percent on Tuesday after it engineered an unusual bankruptcy filing that could leave shareholders in much better shape than bondholders.

The bankruptcy of only part of Dynegy, called Dynegy Holdings, aims to lower Dynegy’s debt and enable it to break some pricey leases on two power plants without dragging parent Dynegy Inc, and its shareholders, through bankruptcy.

That is unusual because typically in a bankruptcy, the shareholders are last in line to be paid back.

Dynegy Inc’s shareholders have the advantage because the company transferred its coal and natural gas assets earlier this year to entities outside of the unit, Dynegy Holdings, that filed for bankruptcy.

Thus, those assets are beyond the reach of many bondholders, such as Avenue Capital, which have filed suit against the parent company, saying the move left the unit insolvent. (Reuters)

Related Posts Plugin for WordPress, Blogger...

Comments are closed.