The Dynegy Disaster Continues

Dynegy (NYSE:DYN) has denied that it fraudulently transferred to itself coal-fired power plants from a unit on the verge of bankruptcy, thereby harming the interests of the unit’s creditors.

Examiner Susheel Kirpalani said in a report filed March 9 in U.S. Bankruptcy Court in Poughkeepsie, New York, that Dynegy Inc., the country’s fourth-largest independent power producer by revenue, made a fraudulent transfer when it placed subsidiary Dynegy Holdings LLC and four other units in bankruptcy court after taking over ownership of the power plants.

“Dynegy is both troubled and disappointed by the examiner’s report as we continue to believe our restructuring activities benefited all stakeholders and were conducted in the proper manner,” Chief Executive Officer Robert C. Flexon said today in a statement.

The company said in a court filing today that “the examiner’s conclusion of a fraudulent transfer is incorrect,” because he mistakenly assumed that Dynegy Holdings was insolvent when the transfer was made. The company also said in its filing that according to documents and other evidence, Dynegy had no intention to hinder the interests of creditors.

Kirpalani, a lawyer at Quinn Emanuel Urquhart & Sullivan LLP, was asked in January to scrutinize Dynegy’s pre-bankruptcy reorganization.

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