<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus Supplement is not complete and may be +
+changed. We may not deliver these securities until a final prospectus +
+supplement is delivered. This Prospectus Supplement and the accompanying +
+Prospectus are not an offer to sell these securities and we are not +
+soliciting offers to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-60253
Subject to Completion, Dated July 14, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 19, 1998)
$ ,000,000
[Dynegy Inc. Logo Appears Here]
DYNEGY INC.
$ % Senior Notes due 200
$ % Senior Notes due 200
- --------------------------------------------------------------------------------
This is a public offering by Dynegy Inc. of $ of % Senior Notes due ,
200 and $ of % Senior Notes due 200 (collectively, the "Senior
Notes"). Interest is payable on each series of Senior Notes on and of
each year, beginning 1999. The Senior Notes are unsecured and
unsubordinated debt securities and are not subject to a sinking fund.
We can redeem the Senior Notes prior to maturity, in whole or in part, at a
redemption price equal to the greater of the principal amount of the Senior
Notes and the make-whole price described in this Prospectus Supplement. We will
also pay accrued interest to the date of redemption. We do not intend to list
the Senior Notes on any securities exchange.
The Senior Notes should be delivered on or about , 1999 through the book
entry facilities of the Depository Trust Company.
<TABLE>
<CAPTION>
Senior Notes Senior Notes
Due 200 Due 200
-------------- --------------
Per Note Total Per Note Total
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Public Offering Price............................. % $ % $
Underwriting Discount............................. % $ % $
Proceeds to Dynegy................................ % $ % $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus Supplement or the attached Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Lehman Brothers
ABN AMRO Incorporated
Banc of America Securities LLC
Chase Securities Inc.
July , 1999
<PAGE>
You should rely only on the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus. No one has
been authorized to provide you with different information. You should not
assume that the information contained in this Prospectus Supplement or the
attached Prospectus is accurate as of any date other than the date on the front
cover of the document. We are not making an offer of these Senior Notes in any
state where the offer is not permitted.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
The Company.............................................................. S-3
Recent Developments...................................................... S-3
Forward-Looking Statements............................................... S-5
Use of Proceeds.......................................................... S-5
Ratios of Earnings to Fixed Charges...................................... S-6
Capitalization........................................................... S-7
Description of Senior Notes.............................................. S-8
Underwriting............................................................. S-10
Validity of Senior Notes................................................. S-11
Experts.................................................................. S-11
Prospectus
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Uncertainty of Forward-Looking Statements................................ 3
The Company.............................................................. 4
The Trust................................................................ 4
Use of Proceeds.......................................................... 6
Ratios of Earnings to Fixed Charges...................................... 6
Description of Debt Securities........................................... 7
Description of the Preferred Securities.................................. 20
Description of Trust Debentures.......................................... 31
Description of Guarantee................................................. 39
Relationship Among the Preferred Securities, the Trust Debentures and the
Guarantee............................................................... 41
Description of Common Stock and Preferred Stock.......................... 43
Description of Securities Warrants....................................... 49
Plan of Distribution..................................................... 50
Validity of Securities................................................... 51
Experts.................................................................. 51
</TABLE>
S-2
<PAGE>
THE COMPANY
Dynegy Inc. ("Dynegy") is a leading provider of energy products and services
in North America and the United Kingdom. Products marketed by Dynegy's
wholesale marketing operations include natural gas, electricity, coal, natural
gas liquids, crude oil, liquid petroleum gas and related services. Dynegy's
wholesale marketing operations are supported by ownership or control of an
extensive asset base and transportation network that includes unregulated power
generation, gas and liquids storage capacity, gas, power and liquids
transportation capacity and gas gathering, processing and fractionation assets.
The critical mass achieved through the combination of a large scale energy
marketing operation with strategically located assets which augment Dynegy's
marketing efforts affords Dynegy the ability to offer innovative, value-
creating energy solutions to its customers.
Dynegy is a holding company that conducts substantially all of its business
through its subsidiaries. From inception of operations in 1984 until 1990,
Natural Gas Clearinghouse ("Clearinghouse") limited its activities primarily to
natural gas marketing. Starting in 1990, Clearinghouse began expanding its core
business operations through acquisitions and strategic alliances resulting in
the formation of a mid-stream energy asset business and the establishment of
energy marketing operations in both Canada and the United Kingdom. Dynegy
initiated electric power marketing operations in February 1994 in order to
exploit opportunities created by the deregulation of the domestic electric
power industry. Effective March 1, 1995, Clearinghouse and Trident NGL Holding,
Inc. ("Holding"), a fully integrated natural gas liquids company, combined and
Holding was renamed NGC Corporation ("NGC"). On August 31, 1996, NGC completed
a strategic combination with Chevron U.S.A. Inc. and certain Chevron affiliates
(collectively "Chevron") whereby substantially all of Chevron's mid-stream
assets were merged with NGC ("Chevron Combination"). Effective July 1, 1997,
NGC acquired Destec Energy, Inc., a leading independent power producer. In July
1998, we changed our name to Dynegy Inc. in order to reflect our evolution from
a natural gas marketing company to an energy services company capable of
meeting the growing demands and diverse challenges of the dynamic energy market
of the 21st Century.
Dynegy's principal executive office is located at 1000 Louisiana, Suite
5800, Houston, Texas 77002, and the telephone number of that office is (713)
507-6400. Dynegy and its affiliates maintain marketing and/or regional offices
in Atlanta, Georgia; Boston, Massachusetts; Calgary, Alberta; Chicago,
Illinois; Dallas, Texas; Englewood, Colorado; London, England; Midland, Texas;
Oklahoma City, Oklahoma; Pleasanton, California; Tampa, Florida; Tulsa,
Oklahoma; and Washington D.C.
RECENT DEVELOPMENTS
On June 14, 1999, Dynegy and Illinova Corporation ("Illinova") agreed to
combine in a transaction in which each of Dynegy and Illinova will become
wholly owned subsidiaries of a newly established parent company ("Newco").
Illinova, headquartered in Decatur, Illinois, is an energy services holding
company with $6.8 billion in assets and annual revenues of $2.4 billion. Its
subsidiaries include Illinois Power, an electric and natural gas utility;
Illinova Generating, which invests in, develops and operates independent power
projects worldwide; and Illinova Energy Partners, which markets energy and
energy-related services in the United States and Canada.
In the combination, Dynegy shareholders may elect to exchange each Dynegy
share for 0.69 of a share of Newco stock, based on a fixed exchange ratio, or
elect to receive $16.50 per share in cash consideration, subject to proration.
Approximately 60% of the consideration received by Dynegy's shareholders will
be Newco stock and 40% will be cash. In aggregate, the cash portion of the
consideration will be approximately $1.06 billion. Each share of Illinova
common stock will be converted into one share of Newco common stock. After the
combination, former Dynegy shareholders will own approximately 51% of the
outstanding shares of Newco stock.
S-3
<PAGE>
Each of Dynegy and Illinova will become separate wholly-owned subsidiaries
of Newco as a result of the combination. The combination will not change
Dynegy's assets or liabilities. The Senior Notes and Dynegy's other
indebtedness will remain obligations of Dynegy.
Dynegy has three large shareholders, Chevron and affiliates of NOVA
Chemicals Corporation ("NOVA") and BG plc ("BG"). These shareholders
collectively own approximately 77% of Dynegy's outstanding equity securities.
Of these shareholders, NOVA and BG have agreed to elect to receive the maximum
amount of cash possible, and Chevron has agreed to elect to receive only Newco
stock. Because of the size of NOVA's and BG's ownership positions, some
proration of the cash portion of the consideration is expected to occur.
Chevron has also agreed to invest $200 to $240 million of new equity capital in
Newco.
The combination brings together Illinova, with strategically positioned
generating facilities in the Midwest and a developing national energy services
business, and Dynegy, one of the country's leading marketers of energy products
and services. Both companies are leading independent power developers and
producers. Upon closing, the combined company is expected to own more than
15,000 gross megawatts of domestic generating capacity representing one of the
nation's most geographically diverse generating asset portfolios. In addition,
Illinova's stable regulated natural gas and electric utility subsidiary with
650,000 customers and retail distribution expertise, coupled with Dynegy's
position as one of the leading natural gas liquids companies in the United
States, are expected to provide a broader spectrum of value opportunities.
Consummation of the combination is subject to various conditions, including
Illinova and Dynegy shareholder approval; the expiration of applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act; the exemption
of Chevron from regulation under the Public Utility Holding Company Act of 1935
as a result of Chevron's ownership of Newco stock; the receipt of necessary
Federal Energy Regulatory Commission and Illinois Commerce Commission
approvals; and the closing by Illinova of the sale of its Clinton nuclear
facility (which is currently under contract for sale). The combination is
expected to close by the end of the first quarter of 2000.
The foregoing summary of the combination is qualified in its entirety by
reference to the texts of the actual merger agreement and other documents that
are filed as exhibits to Dynegy's Current Report on Form 8-K filed with the
Securities and Exchange Commission on June 14, 1999.
S-4
<PAGE>
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the documents incorporated by reference in
this Prospectus Supplement contain various forward-looking statements, within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and information that are based on management's
beliefs as well as assumptions made by and information currently available to
management. When used in this document, words such as "anticipate," "estimate,"
"project," "forecast" and "expect" reflect forward-looking statements. Although
Dynegy believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Such statements are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, projected
or expected. Among the key risk factors that may have a direct bearing on
Dynegy's results of operations and financial condition are:
. competitive practices in the industries in which Dynegy competes;
. fluctuations in commodity prices for natural gas, electricity,
natural gas liquids, crude oil or coal;
. fluctuations in energy commodity prices which could not or have not
been properly hedged or which are inconsistent with Dynegy's open
position in its energy marketing activities;
. operational and systems risks;
. environmental liabilities which are not covered by indemnity or
insurance;
. software, hardware or third-party failures resulting from Year 2000
issues;
. general economic and capital market conditions, including
fluctuations in interest rates;
. the impact of current and future laws and governmental regulations
(particularly environmental regulations) affecting the energy
industry in general, and Dynegy's operations in particular; and
. uncertainties relating to the pending Illinova business combination.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes are estimated to be
approximately $ million, after deducting estimated underwriting discounts
and commissions and expenses associated with this offering. Dynegy intends to
use such proceeds to reduce commercial paper borrowings. As of March 31, 1999,
Dynegy had $635.7 million of commercial paper borrowings outstanding with an
approximate weighted average interest rate of 5.03%.
S-5
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth Dynegy's consolidated ratios of earnings to
fixed charges for the periods shown:
<TABLE>
<CAPTION>
Quarter Ended Year Ended
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C>
1.79 2.22
</TABLE>
For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of income before income taxes and fixed charges (excluding capitalized
interest) less undistributed income from equity investees. Fixed charges
consist of Dynegy's interest expense; amortization of deferred financing costs;
interest capitalized during the year; and the portion of Dynegy's lease rental
expense representative of the interest factor attributable to such leases.
A statement setting forth the computation of the ratios of earnings to fixed
charges for the year ended December 31, 1998 is filed as an exhibit to Dynegy's
Annual Report on Form 10-K for the year ended December 31, 1998, which is
incorporated by reference in this Prospectus Supplement.
S-6
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
Dynegy as of March 31, 1999, on a historical basis and as adjusted to give
effect to the issuance and sale of the Senior Notes offered hereby and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 1999
-------------------------
Historical As Adjusted
---------- -----------
(in thousands)
<S> <C> <C>
Short-term debt (including current maturities)....... $ 334,681(1) $
========== ==========
Long-term debt:
Commercial paper................................... $ 334,686 $
Money market lines of credit....................... 30,000 30,000
6 3/4% Senior Notes due December 15, 2005.......... 150,000 150,000
7 5/8% Senior Debentures due October 15, 2026...... 175,000 175,000
7 1/8% Senior Debentures due May 15, 2018.......... 175,000 175,000
% Senior Notes due , 200 ............ --
% Senior Notes due , 200 ............ --
Other.............................................. 103,431 103,431
---------- ----------
Total long-term debt............................. 968,117
---------- ----------
Guaranteed Preferred Beneficial Interests in
Subordinated Deferrable Interest Debentures......... 200,000 200,000
Stockholders' equity:
Preferred Stock, $0.01 par value, 50,000,000 shares
authorized, 8,000,000 shares designated as Series
A Participating Preferred Stock, 7,815,363 shares
issued and outstanding............................ 75,418 75,418
Common Stock, $0.01 par value, 400,000,000 shares
authorized, 154,086,298 shares issued............. 1,542 1,542
Additional paid-in capital......................... 942,831 942,831
Retained earnings.................................. 159,393 159,393
Less: treasury stock, at cost, 1,200,700 shares.... (17,585) (17,585)
---------- ----------
Total stockholders' equity....................... 1,161,599 1,161,599
---------- ----------
Total capitalization........................... $2,329,716 $
========== ==========
</TABLE>
- --------
(1) Includes $301,029 of commercial paper.
S-7
<PAGE>
DESCRIPTION OF SENIOR NOTES
The following description of the particular terms of the Senior Notes
offered by Dynegy pursuant to this Prospectus Supplement is intended to
supplement, and to the extent inconsistent therewith to replace, the more
general terms and provisions of the debt securities described in the
accompanying Prospectus. Capitalized terms defined in the accompanying
Prospectus have the same meanings when used herein.
General
The summary contained in this Prospectus Supplement of certain provisions of
the Indenture dated September 26, 1996, as amended and restated March 23, 1998
(the "Indenture") between Dynegy and The First National Bank of Chicago, as
trustee (the "Trustee"), does not purport to be complete and is subject to and
qualified in its entirety by reference to the Indenture and the Senior Notes.
The % Senior Notes due , 200 will be limited to $ total
principal amount. The % Senior Notes due , 200 will be limited to
$ total principal amount. Interest at the annual rate set forth on the
cover page of this Prospectus Supplement is to accrue from , 1999 and is
to be payable semiannually on and , commencing , 1999 to the
persons in whose names the Senior Notes are registered at the close of business
on the preceding or , respectively. All payments on the Senior
Notes will be made in U.S. dollars.
The Senior Notes will be general unsecured obligations of Dynegy and will
rank pari passu with Dynegy's existing and future unsecured and unsubordinated
indebtedness.
The Senior Notes will not be subject to any sinking fund.
Optional Redemption
The Senior Notes of each series will be redeemable, at the option of Dynegy,
in whole at any time or in part from time to time, on at least 30 days but not
more than 60 days prior notice mailed to the registered address of each holder
of Senior Notes to be so redeemed, at a redemption price equal to the greater
of (i) 100% of the principal amount of the Senior Notes to be so redeemed plus
accrued interest thereon to the date of redemption and (ii) the sum of the
present values of the remaining scheduled payments of principal of the Senior
Notes to be so redeemed and interest thereon discounted to the date of
redemption, on a semiannual basis (assuming a 360-day year consisting of twelve
30-day months), at the Treasury Rate (as defined herein) plus basis points
in the case of the % Senior Notes due 200 , and plus basis points in the
case of the % Senior Notes due 200 , plus accrued interest thereon to the
date of redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Senior Notes to be redeemed that would be utilized,
at the time of selection and in accordance with customary financial practice,
in pricing new issues of corporate debt securities of comparable maturity to
the remaining term of such Senior Notes.
"Independent Investment Banker" means the Reference Treasury Dealer.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed
as a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, the average
of the Reference Treasury Dealer Quotations for
S-8
<PAGE>
such redemption date. "Reference Treasury Dealer Quotations" means, with
respect to the Reference Treasury Dealer and any redemption date, the average,
as determined by the Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount)
quoted in writing to the Trustee by the Reference Treasury Dealer at 5:00 p.m.,
New York time, on the third business day preceding such redemption date.
"Reference Treasury Dealer" means Lehman Brothers and its successors;
provided, however, that if Lehman Brothers shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"),
Dynegy shall substitute therefor another Primary Treasury Dealer.
The discharge and defeasance provisions and the covenant provisions
described in the accompanying Prospectus under "Description of Securities--
Provisions Applicable to Both Senior and Subordinated Debt Securities--
Defeasance," "--Consolidation, Merger and Sale of Assets" and "--Provisions
Applicable Solely to Senior Debt Securities--Limitations on Liens" will apply
to the Senior Notes.
Book-Entry Only System
The Senior Notes will be issuable only as Registered Securities and will be
represented by one certificate (the "Global Security") to be registered in the
name of a nominee of DTC or any successor depository (the "Depository"). The
Depository will maintain the Senior Notes in denominations of $1,000 and
integral multiples thereof through its book-entry facilities. See "Description
of Securities--Global Securities" in the accompanying prospectus for additional
information concerning the Global Security. In accordance with its normal
procedures, the Depository will record the interests of each Depository
participating firm ("Participant") in the Senior Notes, whether held for its
own account or as a nominee for another person.
So long as the nominee of the Depository is the registered owner of the
Senior Notes, such nominee will be considered the sole owner or holder of the
Senior Notes for all purposes under the Indenture and any applicable laws.
Except as otherwise provided below, a beneficial owner of interests in the
Senior Notes will not be entitled to receive a physical certificate
representing such ownership interest and will not be considered an owner or
holder of the Senior Notes under the Indenture. A beneficial owner is the
person who has the right to sell, transfer or otherwise dispose of an interest
in the Senior Notes and the right to receive the proceeds therefrom, as well as
interest, principal and premium (if any) payable in respect thereof. A
beneficial owner's interest in the Senior Notes will be recorded, in integral
multiples of $1,000, on the records of the Participant that maintains such
beneficial owner's account for such purpose. In turn, the Participant's
interest in such Senior Notes will be recorded, in integral multiples of
$1,000, on the records of the Depository. Therefore, the beneficial owner must
rely on the foregoing arrangements to evidence its interest in the Senior
Notes. Beneficial ownership of the Senior Notes may be transferred only by
compliance with the procedures of a beneficial owner's Participant (e.g.,
brokerage firm) and the Depository. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair the ability to transfer beneficial
interests in the Senior Notes represented by the Global Security.
All rights of ownership must be exercised through the Depository and the
book-entry system, and notices that are to be given to registered owners by
Dynegy or the Trustee will be given only to the Depository. It is expected that
the Depository will forward the notices to the Participants who will in turn
forward the notices to the beneficial owners. Neither Dynegy, the Trustee nor
any Paying Agent or the registrar for the Senior Notes will have any
responsibility or obligation to assure that any notices are forwarded by the
Depository to any Participant or by any Participant to the beneficial owners.
Payments of principal of and interest on the Senior Notes represented by the
Global Security registered in the name of the Depository or its nominee will be
made by Dynegy through the Paying Agent in immediately available funds to the
Depository or its nominee, as the case may be, as the registered owner of the
Senior Notes represented by such Global Security.
S-9
<PAGE>
Dynegy has been advised that the Depository or its nominee, upon receipt of
any payment of principal or interest in respect of the Senior Notes represented
by the Global Security, will credit immediately the accounts of the related
Participants with payment in amounts proportionate to their respective
beneficial interest in the Senior Notes represented by the Global Security as
shown on the records of the Depository. Dynegy expects the payments by
Participants to beneficial owners will be governed by standing customer
instructions and customary practices. Such payments will be the responsibility
of such Participants.
DTC has advised Dynegy and the Underwriters that DTC is a limited-purpose
trust company organized under the Banking Law of the State of New York; a
member of the Federal Reserve System; a "clearing corporation" within the
meaning of the New York Uniform Commercial Code; and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended.
DTC was created to hold securities of Participants and to facilitate the
clearance and settlement of securities transactions among Participants in such
securities transactions through electronic book-entry changes in accounts of
Participants, thereby eliminating the need for physical movement of securities
certificates. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own DTC.
Access to DTC's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by DTC only through
Participants.
UNDERWRITING
The underwriters named below (the "Underwriters") have severally agreed,
subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") between Dynegy and the several Underwriters, to
purchase the respective principal amount of Senior Notes set forth opposite
their respective names below:
<TABLE>
<CAPTION>
Principal Principal
Amount of Amount of
% %
Senior Notes Senior Notes
Underwriters due 200 due 200
------------ ------------ ------------
<S> <C> <C>
Lehman Brothers Inc............................. $ $
ABN AMRO Incorporated...........................
Banc of America Securities LLC..................
Chase Securities Inc............................
-------- --------
Total......................................... $ $
======== ========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the Senior Notes are subject to certain conditions and that, if any
Senior Notes are purchased by the Underwriters pursuant to the Underwriting
Agreement, all of the Senior Notes agreed to be purchased by the Underwriters
pursuant to the Underwriting Agreement must be so purchased.
Dynegy has been advised by the Underwriters that they propose to offer the
Senior Notes offered hereby initially at the public offering price set forth on
the cover page of this prospectus supplement, and to certain selected dealers
(who may include Underwriters) at such public offering price less a concession
not to exceed % of the principal amount of the Senior Notes. The
Underwriters or such selected dealers may reallow a commission to certain other
dealers not to exceed % of the principal amount of the Senior Notes. After
the initial public offering, the public offering price, the concession to
selected dealers and the reallowance to other dealers may be changed by the
Underwriters.
S-10
<PAGE>
There is no public market for the Senior Notes, and Dynegy has no plans to
list the Senior Notes on a securities exchange. Dynegy has been advised by each
Underwriter that it presently intends to make a market in the Senior Notes;
however, none of the Underwriters is obligated to do so. Any such market-making
may be discontinued at any time, for any reason, without notice. If any of the
Underwriters ceases to act as a market-maker for the Senior Notes for any
reason, there can be no assurance that another firm or person will make a
market in the Senior Notes. There can be no assurance that an active market for
the Senior Notes will develop or, if a market does develop, at what prices the
Senior Notes will trade.
In connection with this offering and in compliance with applicable law, the
Underwriters may sell more Senior Notes than the total amount shown on the list
of Underwriters and participations which appears above. The Underwriters may
also effect transactions which stabilize, maintain or otherwise affect the
market price of the Senior Notes at levels above those which might otherwise
prevail in the open market. Such transactions may include placing bids for the
Senior Notes or effecting purchases of the Senior Notes for the purpose of
pegging, fixing or maintaining the price of the Senior Notes or for the purpose
of reducing a syndicate short position created in connection with the offering.
In addition, the contractual arrangements among the Underwriters include a
provision whereby, if Lehman Brothers Inc. purchases Senior Notes in the open
market for the account of the underwriting syndicate and the securities
purchased can be traced to a particular Underwriter or member of the selling
group, the underwriting syndicate may require the Underwriter or selling group
member in question to purchase the Senior Notes in question at the cost price
to the syndicate or may recover from (or decline to pay to) the Underwriter or
selling group member in question the selling concession applicable to the
securities in question. The Underwriters are not required to engage in any of
these activities and any such activities, if commenced, may be discontinued at
any time.
Neither Dynegy nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Senior Notes. In addition, neither
Dynegy nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
Certain of the Underwriters and their respective affiliates have performed
investment banking, financial advisory and lending services to Dynegy in the
past for which they have received customary fees and compensation.
Dynegy has agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect of
such liabilities.
VALIDITY OF SENIOR NOTES
The validity of the Senior Notes will be passed upon for Dynegy by Vinson &
Elkins L.L.P., Houston, Texas. Certain legal matters in connection with the
Senior Notes will be passed upon for the Underwriters by Baker & Botts, L.L.P.,
Houston, Texas.
EXPERTS
The audited consolidated financial statements and schedule of Dynegy and its
subsidiaries, incorporated by reference herein, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said report.
S-11
