<PAGE>
Filed Pursuant to
Rule 424(b)(2)
Registration No. 333-89021
Prospectus Supplement
March 15, 2000
(To prospectus dated November 3, 1999)
$300,000,000
[Dynegy Inc. Logo Appears Here]
DYNEGY HOLDINGS INC.
8.125% Senior Notes due 2005
------------------
This is a public offering by Dynegy Holdings Inc. of $300,000,000 of 8.125%
Senior Notes due March 15, 2005 (the "Senior Notes"). Interest is payable on
the Senior Notes on March 15 and September 15 of each year, beginning September
15, 2000. 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 such 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 March 20, 2000 through the
book entry facilities of the Depository Trust Company.
<TABLE>
<CAPTION>
Per Note Total
-------- ------------
<S> <C> <C>
Public Offering Price.................................... 99.499% $298,497,000
Underwriting Discount.................................... 0.600% $ 1,800,000
Proceeds to Dynegy Holdings.............................. 98.899% $296,697,000
</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.
Banc of America Securities LLC Lehman Brothers
Banc One Capital Markets, Inc.
Chase Securities Inc.
Salomon Smith Barney
March 15, 2000
<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-4
Where You Can Find More Information...................................... S-4
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-11
Validity of Senior Notes................................................. S-12
Experts.................................................................. S-12
Prospectus
About This Prospectus.................................................... 1
Where You Can Find More Information...................................... 1
Uncertainty of Forward-Looking Statements................................ 2
The Company.............................................................. 3
The Trust................................................................ 3
Use of Proceeds.......................................................... 5
Ratios of Earnings to Fixed Charges...................................... 5
Description of Debt Securities........................................... 6
Description of the Preferred Securities.................................. 18
Description of Trust Debentures.......................................... 30
Description of Guarantee................................................. 38
Relationship Among the Preferred Securities, the Trust Debentures and the
Guarantee............................................................... 41
Plan of Distribution..................................................... 43
Validity of Securities................................................... 44
Experts.................................................................. 44
</TABLE>
S-2
<PAGE>
THE COMPANY
Dynegy Holdings Inc. is a leading provider of energy products and services
in North America, the United Kingdom and in continental Europe. Products
marketed by our wholesale marketing operations include natural gas,
electricity, coal, emissions, natural gas liquids, crude oil, liquid petroleum
gas and related services. Our 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 the marketing efforts affords us the ability to offer innovative,
value-creating energy solutions to our customers.
In June 1999, we announced the execution of definitive agreements to merge
with Illinova Corporation. The Illinova merger closed on February 1, 2000. In
connection with the merger, our company changed its name from Dynegy Inc. to
Dynegy Holdings Inc. and a new holding company, Dynegy Inc., an Illinois
Corporation, was formed. Dynegy Inc. is the parent of our company and Illinova
Corporation. The following chart depicts the post-merger structure:
[Dynegy Organizational Chart]
We are a holding company and conduct substantially all of our business
through our subsidiaries. The Illinova transaction did not change our Company's
assets or liabilities. The Senior Notes and Dynegy Holdings' other indebtedness
remain obligations of Dynegy Holdings.
The principal executive office of the Company is located at 1000 Louisiana,
Suite 5800, Houston, Texas 77002, and the telephone number of that office is
(713) 507-6400.
S-3
<PAGE>
RECENT DEVELOPMENTS
On December 16, 1999, Dynegy Holdings sold four gas processing plants and
related gathering systems located in East Texas and Arkansas to Sulphur River
Gathering LP for approximately $115 million. The four plants were the Eustace
Plant (Henderson County, Texas), the New Hope plant (Franklin County, Texas),
the East Texas plant (Gregg County, Texas), and the Texarkana Plant (Miller
County, Arkansas). The sale included approximately 675 miles of gathering
lines. The plants were capable of processing approximately 175,000 million
cubic feet of gas per day.
On February 1, 2000, Dynegy Holdings sold its ownership interests in eleven
cogeneration facilities in California to El Paso Energy West Coast Acquisition
Corp. for approximately $256 million. The eleven facilities in which Dynegy
Holdings sold interests include Corona (Corona, California), Kern Front (Kern
County), High Sierra (Kern County), Double "C" (Kern County), San Joaquin
(Stockton), Chalk Cliff (Kern County), Badger Creek (Kern County), McKittrick
(McKittrick), Live Oak (Kern County), Crockett (Crockett), Bear Mountain
(Bakersfield). The 11 facilities had a combined capacity of approximately 370
net megawatts.
Also on February 1, 2000, Dynegy Holdings announced that ONEOK agreed to
purchase Dynegy Holdings' gathering systems, processing facilities and
transmission pipelines located in the mid-continent region for $307.7 million.
This transaction is expected to close by the end of the first quarter of 2000,
subject to customary regulatory and other approvals.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until we sell all of the securities described in this prospectus.
. Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999.
. The description of our securities contained in our Registration Statement
on Form 10 as filed with the SEC on February 2, 2000.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing or telephoning our parent at the following address:
Dynegy Inc.
1000 Louisiana, Suite 5800
Houston, Texas 77002
Attention: Investor Relations
(713) 507-6466
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 is 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
we believe that the expectations reflected in such forward-looking statements
are reasonable, we 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 our results of
operations and financial condition are:
. competitive practices in the industries in which we compete;
. 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 our open position
in our energy marketing activities;
. operational and systems risks;
. environmental liabilities which are not covered by indemnity or
insurance;
. 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 our operations in particular; and
. uncertainties relating to the Illinova business combination.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes will be approximately
$296.5 million, after deducting underwriting discounts and commissions and
other offering expenses. The net proceeds will be used by Illinois Power, a
subsidiary of Dynegy Inc., to repay outstanding debt, including $40 million of
6.125% mortgage bonds due in March 2000 and $110 million of 5.625% mortgage
bonds due in April 2000. Illinois Power will use the remaining net proceeds
either to reduce commercial paper borrowings or to make open market purchases
of its other securities. At December 31, 1999, Illinois Power had $305 million
in commercial paper outstanding at a weighted average interest rate of 6.26%.
Dynegy Holdings expects that a significant portion of the approximately $422
million of proceeds from the December 1999 sale of gas processing plants and
gathering systems in East Texas and the pending asset sale to ONEOK will be
used to reduce its indebtedness. Additionally, Dynegy Inc. intends to transfer
the stock of Illinova Power Marketing, Inc. ("IPMI"), currently a wholly-owned
subsidiary of Illinova Corporation, to Dynegy Holdings. IPMI owns and operates
the fossil-fueled generating assets formerly held by Illinois Power. This
transfer will result in a consolidation of Dynegy Inc.'s energy convergence
business under Dynegy Holdings and will be subject to certain regulatory
approvals.
S-5
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratios of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
Dynegy Holdings, Inc.
------------------------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.43 2.22 (a) 4.07 2.48(b)
</TABLE>
- --------
(a) Earnings were inadequate to cover fixed charges for the year ended
December 31, 1997, by approximately $72.9 million.
(b) The computation for 1995 includes the consolidated results of Natural Gas
Clearinghouse and its subsidiaries for the full year, and of Trident NGL
Holding, Inc. and its subsidiaries from March 1, 1995, the effective date
of the merger between Natural Gas Clearinghouse and Trident NGL Holding,
Inc.
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 Holdings' interest expense; amortization of deferred
financing costs; interest capitalized during the year; and the portion of
Dynegy Holdings' 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, 1999 is filed as an exhibit to
Dynegy Holdings' Annual Report on Form 10-K for the year ended December 31,
1999, 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 Holdings as of December 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. The as adjusted
entries also give effect to the Illinova merger which closed on February 1,
2000. See "Use of Proceeds."
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------
As Adjusted
for As Adjusted
Illinova for this
Historical Merger Offering
---------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Short-term debt (1)........................ $ 191,731 $ 191,731 $ 191,731
========== ========== ==========
Long-term debt:
Commercial paper......................... 359,333 359,333 359,333
Money market lines of credit............. 40,000 40,000 40,000
6.875% Senior Notes due July 15, 2002.... 200,000 200,000 200,000
6.750% Senior Notes due December 15,
2005.................................... 150,000 150,000 150,000
7.450% Senior Notes due July 15, 2006.... 200,000 200,000 200,000
7.125% Senior Debentures due May 15,
2018.................................... 175,000 175,000 175,000
7.625% Senior Debentures due October 15,
2026.................................... 175,000 175,000 175,000
8.125% Senior Notes due March 15, 2005... -- -- 300,000
Other.................................... 34,593 34,593 34,593
---------- ---------- ----------
Total long-term debt................... 1,333,926 1,333,926 1,633,926
---------- ---------- ----------
Company Obligated Preferred Securities of
Subsidiary Trust.......................... 200,000 200,000 200,000
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 at
December 31, 1999; none outstanding as
adjusted................................ 75,418 -- --
Common Stock, $0.01 par value,
400,000,000 shares authorized,
157,499,001 shares issued at December
31, 1999; 1,000 shares outstanding as
adjusted................................ 1,575 1 1
Additional paid-in capital............... 973,000 1,032,408 1,032,408
Retained earnings........................ 277,074 277,074 277,074
Less: treasury stock, at cost: 1,200,700
shares at December 31, 1999............. (17,585) -- --
---------- ---------- ----------
Total stockholders' equity............. 1,309,482 1,309,483 1,309,483
---------- ---------- ----------
Total capitalization................. $2,843,408 $2,843,409 $3,143,409
========== ========== ==========
</TABLE>
- --------
(1) Includes $97,149 of commercial paper.
S-7
<PAGE>
DESCRIPTION OF SENIOR NOTES
The following description of the particular terms of the Senior Notes
offered by us 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 Holdings and Bank One Trust Company (formerly
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 will be limited to $300,000,000 total principal amount.
Dynegy Holdings may, without the consent of the holders of the Senior Notes,
create and issue additional notes having the same ranking and the same interest
rate, maturity date and other terms as the Senior Notes, so that such further
notes may be consolidated and form a single series with the Senior Notes.
Interest is to accrue from March 20, 2000 and is to be payable semiannually on
March 15 and September 15, commencing September 15, 2000, to the persons in
whose names the Senior Notes are registered at the close of business on the
preceding September 1 or March 1, respectively. All payments on the Senior
Notes will be made in U.S. dollars.
The Senior Notes will be general unsecured obligations of Dynegy Holdings
and will rank pari passu with Dynegy Holdings' existing and future unsecured
and unsubordinated indebtedness.
The Senior Notes will not be subject to any sinking fund.
Optional Redemption
The Senior Notes will be redeemable, at the option of Dynegy Holdings, 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 such notes to be so redeemed. The redemption price on the Senior Notes is
equal to the greater of (i) 100% of the principal amount of such 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
such 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 25 basis points,
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 one of the Reference Treasury Dealers.
"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)
S-8
<PAGE>
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 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 Banc of America Securities LLC or Lehman
Brothers and their respective successors; provided, however, that if either
party shall cease to be a primary U.S. Government securities dealer in New York
City (a "Primary Treasury Dealer"), Dynegy Holdings 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 certificates (the "Global Securities") 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 Securities. 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 Securities.
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 Holdings 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
Holdings, the Trustee nor any Paying Agent or
S-9
<PAGE>
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 Securities registered in the name of the Depository or its nominee will
be made by Dynegy Holdings 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 Securities.
Dynegy Holdings 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 Securities, 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
Securities as shown on the records of the Depository. Dynegy Holdings 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 Holdings 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.
S-10
<PAGE>
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 Holdings and the several Underwriters,
to purchase the respective principal amount of Senior Notes set forth opposite
their respective names below:
<TABLE>
<CAPTION>
Principal
Amount of
Underwriters Senior Notes
------------ ------------
<S> <C>
Banc of America Securities LLC.............................. $105,000,000
Lehman Brothers Inc......................................... 105,000,000
Banc One Capital Markets, Inc............................... 30,000,000
Chase Securities Inc........................................ 30,000,000
Salomon Smith Barney Inc.................................... 30,000,000
------------
Total..................................................... $300,000,000
============
</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 Holdings 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 0.35% 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 0.20% 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.
There is no public market for the Senior Notes, and Dynegy Holdings has no
plans to list the Senior Notes on a securities exchange. Dynegy Holdings 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 Banc of America Securities LLC or 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.
S-11
<PAGE>
Neither Dynegy Holdings 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 Holdings 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, trustee and lending services to Dynegy
Holdings and its affiliates in the past for which they have received customary
fees and compensation.
Dynegy Holdings 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 Holdings 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
Holdings and its subsidiaries, incorporated by reference in this prospectus and
elsewhere in the registration statement, 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-12
