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Dianne Tordillo
Dianne Tordillo
Articles (179)  | Author's Website |

Billionaire Investor Howard Marks Buys Dynegy Inc. After Its Emergence from Bankruptcy

November 13, 2012 | About:

Oaktree Capital’s Howard Marks has reported to adding energy stock, Dynegy Inc. (NYSE:DYN) to its portfolio as of Nov. 2, according to GuruFocus Real Time Picks, about a month after the company emerged from Chapter 11 bankruptcy in October.

This transaction places Marks as 7.23 percent owner of Dynergy.

Dynegy Inc. is a company that generates wholesale power to energy companies, operating in six U.S. states in the Midwest, the Northeast and the West coast.

As the company recuperates from Chapter 11, Dynegy’s has acquired a revamped balance sheet that will accommodate post-emergence operations, with about $800 million in liquidity in the form of cash; part of this cash will be used to eliminate the $4 billion debt as part of it Chapter 11 process, which gives Dynegy “one of the strongest balance sheets in the independent power producers sector,” according to a news release.

Dynegy president and chief executive officer, Robert C. Flexon, said the following statement in the release: “Dynegy is well positioned for success and we are committed to creating value for our investors. With the Chapter 11 process behind us, our focus is exclusively on executing our forward strategy. With our balanced asset portfolio, along with operational, commercial and financial discipline and our dedicated workforce, we are confident that we will deliver favorable results in the current as well as future market environments.”

Last week, Dynegy announced its third quarter fiscal report, its first quarterly report since its emergence, as well as an update on its debt repayment.

So far, Dynegy has announced to repay $325 million to its lenders to repay outstanding loans for two of its operations, while it awaits an update to an auction process for the sale of one of its assets in the northeast.

Below is an excerpt from its third quarter fiscal report:

“Dynegy Inc.reported third quarter 2012 Adjusted EBITDA for the Coal and Gas segments of $50 million compared to $102 million for the same period in 2011. Lower realized prices for the Coal segment, lower revenues from the termination of certain California contracts, and the settlement of legacy financial positions reduced Adjusted EBITDA for the Coal and Gas Segment by $89 million. Partially offsetting these items were a $12 million improvement in Coal and Gas segment general and administrative and operating and maintenance expenses, a $14 million benefit related to lower option premium expenses, and a $10 million positive adjustment for non-cash amortization related to the Gas segment’s Independence contract. The operating loss for Dynegy’s Coal and Gas segments was $(1) million for the third quarter of 2012 compared to operating income of $40 million for the same period in 2011. The net loss for Dynegy’s consolidated operations was $(41) million for the third quarter of 2012 compared to a net loss of $(129) million for the same period in 2011.”

Dynegy Inc. is currently trading at $18.10 per share.

As new owner, Marks currently holds 7.2 million shares of Dynegy. The recent transaction impacted his portfolio by 2.5 percent.

Marks currently has 177 stocks in his portfolio as of the end of the second quarter, with a total value of $5.28 billion. View Howard Marks’ current portfolio here.

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About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website

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