July 6, 2012 / 3:36 PM / 5 years ago

TEXT-S&P cuts Dynegy rating to 'D'

3 Min Read

Overview
     -- U.S. independent power producer Dynegy Inc. filed for Chapter 11 
bankruptcy protection.
     -- We expected this filing after the bankruptcy proceedings on Dynegy 
Inc.'s subsidiary, Dynegy Holdings LLC (not rated).
     -- We lowered Dynegy Inc.'s rating to 'D'.
     -- We affirmed subsidiary Dynegy Power LLC's rating at CCC+/Negative/--.

Rating Action
On July 6, 2012, Standard & Poor's Ratings Services lowered Dynegy Inc.'s 
corporate credit rating to 'D' following its bankruptcy filing. We affirmed 
our 'CCC+' corporate rating on Dynegy Power LLC, which is ring-fenced from 
Dynegy Holdings LLC.

Rationale
We expected Dynegy Inc. to file for bankruptcy protection based on the 
bankruptcy process of Dynegy Holdings. Dynegy Inc. and Dynegy Holdings will 
emerge from bankruptcy into a single unit under the proposed plan. The 
companies plan to emerge in the late third quarter of 2012.

Dynegy Power LLC is a subsidiary of Dynegy Holdings. We rate it at 'CCC+', 
above the Dynegy Holdings and Dynegy ratings based on ring-fencing provisions 
that make Dynegy Power bankruptcy-remote from its parents, but not 
bankruptcy-proof. Despite Dynegy Holdings' bankruptcy filing in November 2011, 
creditors have not tried to pull Dynegy Power into the bankruptcy proceedings. 
Dynegy Power has issued $1.1 billion in credit facilities due 2017, and credit 
facility lenders are secured by all the assets of Dynegy Power, which provides 
a disincentive for Dynegy Holdings' creditors to force a filing. Dynegy 
Holdings' creditors will gain Dynegy Power anyway under the proposed plan.  

Recovery analysis
Our recovery score on Dynegy Power's $1.1 billion credit facility is '1'. See 
our recovery report published June 29, 2012 for more information.

Outlook
The negative outlook on Dynegy Power reflects exposure to the Dynegy Holdings 
and Dynegy Inc. bankruptcy process. It does not appear that Dynegy Holdings' 
creditors seek to bring Dynegy Power into the bankruptcy proceeding. We would 
lower the rating if we think there is a greater chance that Dynegy Power could 
be pulled into the bankruptcy proceedings.

Related Criteria And Research
2008 Corporate Credit Criteria, April 15, 2008

Ratings List
Rating Lowered
                           To         From
Dynegy Inc.
Corporate credit rating    D/--/--    CC/Negative/--

Ratings Affirmed
Dynegy Power LLC
Corporate credit rating    CCC+/Negative/--
 Senior secured            B
  Recovery rating          1


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below