Published: March 09, 2011
Fitch Lowers Dynegy, Inc. and Units Ratings
NEW YORK - (BUSINESS WIRE) - Fitch Ratings has downgraded the ratings on Dynegy Inc. (Dynegy) and its
subsidiaries and affiliates following the company's filing of its 2010
10k wherein Dynegy's auditors have raised substantial doubt as to its
ability to continue as a going concern and the company announced it
would likely trip debt covenants in its credit facilities. Fitch
believes a restructuring of Dynegy's capital structure is now likely
consistent with the Issuer Default Ratings below.
Fitch has taken the following rating actions:
Dynegy Inc.
--Issuer Default Rating (IDR) downgraded to 'CC' from 'CCC'.
Dynegy Holdings, Inc.
--IDR downgraded to 'CC' from 'CCC';
--Secured bank facilities downgraded to 'B/RR1' from 'B+/RR1';
--Senior unsecured rating downgraded to 'CC/RR4' from 'CCC/RR4'.
Dynegy Capital Trust I
--Trust preferred rating affirmed at 'C/RR6'.
Sithe Independence Funding Corp.
--Secured bond rating downgraded to 'B/RR1' from 'B+/RR1'.
The Rating Outlook is Negative.
The underperformance of Dynegy's merchant generation operations reflects
the decline in hedged electricity and fuel commodity margins and Dynegy
reported another large loss in 2010. With the collapse of two previous
acquisition offers, any improvement in Dynegy's financial profile will
be contingent upon an increase in power prices, shrinkage in the reserve
capacity margins and improvement in electricity demand in the wholesale
market where Dynegy owns and operates its generating plants. Fitch
believes these market factors will improve over time, albeit too slowly
for Dynegy to generate sufficient cash flow for its capital and
operating needs.
Given its poor near term operating prospects, Dynegy's financial
flexibility has become increasingly constrained. Dynegy does own
valuable assets in desirable markets including natural gas fired
generation assets in California that previously were under contract of
sale for $1.4 billion as part of an earlier acquisition of Dynegy by the
Blackstone Group, although Dynegy would not likely realize such value in
today's environment.
The 'RR1' rating for Dynegy Holdings secured credit facility and
priority notes reflects Fitch's estimate of superior recovery for
secured creditors in the 90% to 100% of the par value of their claims in
the event of a bankruptcy. Senior unsecured creditors are likely to
receive average recovery in the 30% to 50% range. Trust preferred
securities have poor recovery prospects.
Fitch has also downgraded the ratings of Sithe/Independence Funding
Corporation's secured bonds. Fitch continues to view the project as a
distinct entity, separate from the project's owner. However, in light of
the Dynegy companies' dual role as owner and off taker as well as their
current credit ratings, Fitch views the project's credit profile as
being closely analogous to a separately secured financing of Dynegy and
has notched its ratings as such.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', Aug. 13, 2010;
--'U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and
Financial Guidelines', Aug. 22, 2007.
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646
U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and
Financial Guidelines
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=338030
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE.
Fitch Ratings
Primary Analyst
Peter Molica, +1-212-908-0288
Director
Fitch,
Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary
Analyst
Glen Grabelsky, +1-212-908-0577
or
Committee
Chairperson
Sharon Bonelli, +1-212-908-0581
or
Media
Relations:
Cindy Stoller, +1-212-908-0526
Email: cindy.stoller@fitchratings.com
Copyright © 2012, Business Wire, Inc., All rights reserved.
Copyright © 2012, NewsBlaze,
Daily News
Search News
