Dynegy Struggling to Remain a Going Concern (DYN, IEP)

After failing to pull the trigger on two buyout offers, Dynegy Corp. (NYSE: DYN) stated in its 10-K filing yesterday that it still has plenty of problems:

“Our accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these consolidated financial statements.  However, continued low power prices over the past two years have had a significant adverse impact on our business.  Further, as our credit rating has declined, counterparty requirements for posting collateral in support of our risk management positions have become more stringent. … To continue as a going concern over the next twelve months, we must either (i) meet the financial covenants so that we can access our Credit Facility, or (ii) amend or replace our Credit Facility or otherwise secure additional capital.”

The company reported $1.3 billion in outstanding debt under its credit facility, which has a limit of $1.8 billion. Any amendment or replacement will surely cost the company more, threatening its survival even further. If Dynegy can’t make the financing happen, “it may be necessary for us to seek protection from creditors under Chapter 11.”

Dynegy’s shareholders most recently rejected an offer of $5.50/share, or $665 million in cash, from investor Carl Icahn’s Icahn Enterprises, L.P. (NYSE: IEP). On top of that, the company’s CEO, CFO, and general counsel have all resigned, leaving the company with interim appointees from among its board of directors.

In it’s earnings statement Dynegy said, “In light of recent management and board changes that may affect the company’s strategic plans, Dynegy currently does not intend to provide guidance estimates for 2011.” The company also said that investors should not rely on any previous forecasts for 2011.

The company’s loss for 2010 narrowed from $1.26 billion in 2009 to $234 million. Revenues were also down year-over-year from $2.46 billion in 2009 to $2.32 billion in 2010.

Dynegy shares are down nearly -8% in pre-open trading this morning.

Paul Ausick