Dynegy in asset-sale deal with LS Power, plans job cuts

As part of the deal, LS Power will return 245 million of Class B Dynegy shares held by it in exchange for Dynegy's five peaking and three combined-cycle generation assets.

The deal also includes the sale of Dynegy's remaining interest in a project under construction in Texas.

LS Power will receive $235 million principal amount of 7.5 percent senior unsecured notes due 2015, Dynegy said in a statement.

Dynegy said it would also eliminate its dual-class stock structure and was initiating a cost reduction program aimed at lowering expenses by about $400 million to $450 million over the next four years.

The remaining 95 million Class B shares held by LS Power will be converted into the equivalent number of Class A shares, giving LS Power about a 15 percent stake in Dynegy.

Additionally, LS Power has agreed to terminate the existing shareholder agreement between it and Dynegy, and has entered into a new agreement restricting it from increasing its future ownership in Dynegy for a specified period.

Dynegy expects to take a restructuring charge of less than $5 million in the third quarter related to a workforce reduction associated with the cost savings program.

Separately, the company announced a second-quarter loss hurt by lower realized prices.

Shares of Dynegy closed at $1.93 Friday on the New York Stock Exchange.

(Reporting by Hezron Selvi in Bangalore, Editing by Dinesh Nair)