-- U.S. independent power producer Dynegy Inc. filed for Chapter 11
-- 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/--.
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.
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.
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.
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
Corporate credit rating D/--/-- CC/Negative/--
Dynegy Power LLC
Corporate credit rating CCC+/Negative/--
Senior secured B
Recovery rating 1
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