Fitch Rates Dynegy Holdings' $600MM Secured Credit Facility 'BB-'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned a 'BB-' rating and 'RR1' Recovery Rating (RR) to Dynegy Holdings Inc.'s (DYNH) fourth amended and restated secured credit facility, which is the same rating level as the secured credit facility it is replacing and is comprised of the following: -- Three-year $400 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility -- Six-year $200 million letter of credit facility. Fitch currently rates DYNH's outstanding ratings as follows: -- Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) 'B-'; -- Secured credit facility 'BB-/RR1'; -- Second priority senior secured notes 'B+/RR1'; -- Senior unsecured notes 'B-/RR4'; -- Rating Outlook Stable. The credit facility, which will be used to provide operating liquidity to support the company's power generation business, benefits from a first priority lien on substantially all the assets of DYNH and certain of Dynegy Inc.'s (DYN dyn abbr. dyne ) assets and a senior position in its capital structure. In addition, it is guaranteed by DYN and most material subsidiaries of DYN and DYNH. Ratings for DYNH's securities recognize the benefits of liability management activities that the company is currently undertaking. They also consider Fitch's current valuation of DYNH's generating assets utilizing an independent power market model that calculates the value for each of its generating plants based on the net present value (NPV NPV See: Net present value ) of its projected revenue stream. Fitch's valuation of DYNH's enterprise value under distressed conditions has been applied to the securities in the capital structure and other claims in their relative priority. As a result of this analysis, the credit facility has been assigned a 'BB-/RR1' rating which is three notches above its IDR and reflects outstanding recovery prospects exceeding 100% even under low-valuation scenarios. DYN's liability management activities have several components and when completed will cause a material change to the company's capital structure resulting in lower overall debt levels. Key activity components are as follows: Last week, DYNH announced the receipt of tenders for its second priority senior secured notes which in the aggregate represent $1.663 billion or 95% of the outstanding balance. Proceeds from the newly issued $750 million, 8.375% senior notes due 2016 along with cash on hand will be used to fund the tender. On March 15, 2006, DYNH began a conversion/consent solicitation for its $225 million convertible subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before whereby it would exchange a combination of cash and common stock for the outstanding subordinated convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. . On March 7, 2006, DYNH paid $370 million to terminate its Sterlington toll obligation. In its Recovery Rating (RR) analysis, Fitch had considered the NPV of the estimated out-of-the-money portion of the toll obligation as an unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. equivalent. DYNH's 'B-' IDR recognizes a high level of business risk associated with its mostly unhedged merchant generation operations and the correlation of future financial performance to the level of natural gas prices which are expected to remain volatile. While credit measures should improve with less debt and lower interest costs as a result of the liability management activities, DYNH's overall credit profile should remain consistent with the current IDR over the near term. Long-term improvement in operating performances and future upgrades to the IDR will be primarily dependent on a sustained power market recovery. Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of credit recovery on a given obligation in the event of a default. A broad review of Fitch's RR methodology as it relates to specific sectors, including a case study webcast, can be found at www.fitchratings.com Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. 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