After Failed Buyouts, Is Dynegy Really Headed for Bankruptcy?
By Chris on March 11, 2011
Departing leadership from energy provider Dynegy warned this week that the company may be forced to file for bankruptcy protection if it is unable to meet earning requirements by creditors in Q3 and Q4 of this year.
But doom and gloom statements have become regular from Dynegy executives over the last eight months as the company experienced layoffs, a series of failed takeover bids by hedge fund stakeholders, and now, turnover at the top. The statements set off alarm bells in the business media, but they were nowhere near the first mentions of bankruptcy:
The above timeline shows bankruptcy and corporate restructuring events for Dynegy since mid-2009 identified using Recorded Future. Way back in August 2009, a full year before the earliest takeover efforts from Blackstone Group, an analyst suggested a ratings downgrade from S&P might signal bankruptcy and the need for a ‘white knight’ takeover bid. After Blackstone Group’s takeover bid failed to win over shareholders in late November, you find (side panel) reports that Dynegy’s management is warning of bankruptcy.
For fundamental researchers, think about the ability to conduct quick hit research on a company’s past or due diligence when considering a trade. In this case when a company is being framed as extremely fragile, but in context, is perhaps no more at risk than it has been for the past year.
Separately, one might want to visualize Dyngegy’s M&A roller coaster.
It’s easy to identify meaningful events as online momentum spikes around Blackstone’s initial bid for control of the company and two peaks around the end of the year show shareholders rejection of Blackstone and investor Carl Icahn’s swoop for Dynegy. Finally, a smaller momentum bump in February depicts where Icahn’s bid was also shot down by shareholders.
Lastly, if we just wanted to scope out the most recent news to isolate events related to influential players around Dynegy, we could look at connections between the company and other entities derived from events over the past week.
Not too surprising a result set given Dynegy’s recent history, but if you follow through to the live treemap you can quickly learn that this week Carl Icahn signed an agreement allowing him to buy up to 20 percent of the company. He also selected 2 new board members for the company while Seneca Capital was awarded one additional seat.
It’s worth noting that based on SEC filings, current Dynegy management has shown no purchasing activity since Carl Icahn bought options back in early November. The absence of trading could be viewed as a lack of faith from insiders on the company’s future prospects.
Further shuffling is slated in the company’s personnel when looking forward at the rest of the year you find that none of the current directors will be seeking reelection at Dynegy’s company meeting in June.
Separately, given the unwillingness of Dynegy shareholders to cash out at the prices offered by Blackstone or Icahn, one wonders if the recent warnings of impending bankruptcy are really warranted this time or if they’re just one last jab at a company they couldn’t sell?