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Dynegy Inc. on Nov. 15 declined a $2 billion line of credit offer made Nov. 12 by Carl Icahn and a group of investor funds, noting that the facility does little to address Dynegy's long-term cash needs or a projected negative free cash flow balance of $1.6 billion over the next five years.
A group of investor funds controlled by Icahn made the credit line offer in a Nov. 12 ownership filing disclosing that the group had increased its beneficial ownership of Dynegy stock to 12.9% ahead of a special Nov. 17 shareholder meeting to vote on Blackstone Group LP's proposal for one of its affiliates to acquire Dynegy.
Icahn laid out the details of the facility in a Nov. 12 letter addressed to Dynegy Chairman, President and CEO Bruce Williamson. While Icahn noted that he was skeptical of Dynegy's claims of a looming liquidity crisis, he said the facility nonetheless should leave "absolutely no question concerning short term liquidity that might cause certain shareholders to worry and vote for the proposed Blackstone transaction."
Dynegy agreed that Icahn's offer would enable it to meet certain short-term capital needs but said it would rather access the capital markets on its own terms, and it questioned Icahn's motives for his "eleventh hour" credit offer.
"It appears to Dynegy that Mr. Icahn is attempting to derail the Blackstone transaction by making the non-binding Icahn credit facility proposal, which he can withdraw or revoke at any time. Dynegy cannot be sure of Mr. Icahn's motivations, but Dynegy believes he has made this non-binding proposal in order to gain contingent control of Dynegy," the company said in a Nov. 15 news release. "When, inevitably,...