Debt-laden independent power producer Dynegy Inc is close to making a bankruptcy filing for one of its units, sources familiar with the situation said Monday.
The filing for the unit, Dynegy Holdings, would not affect the parent company, whose shareholders include billionaire investor Carl Icahn and investment firm Seneca Capital, the sources said.
Dynegy Inc ended up having to cancel a $1.25 billion debt exchange for Dynegy Holdings after investors failed to show up. Dynegy Holdings last week also skipped a $43.8 million interest payment to noteholders.
The bankruptcy filing could come within the next day, according to one of the sources, who was not authorized to speak publicly on the situation.
The unit, whose assets include two unprofitable leased power plants, has a $60 million lease payment due on Nov. 8, according to CreditSights analyst Andy DeVries. The sources said they do not expect the company to make that payment.
Dynegy Holdings has issued $3.5 billion in unsecured bonds and faces more than $700 million in lease payments over the next five years.
Dynegy Inc has been struggling with its debt load as its power business has been squeezed by rock-bottom natural gas prices.
Dynegy Inc did not return a call requesting comment.