Fitch Upgrades Dynegy to 'B'; Sithe Independence to '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. upgrades the issuer default ratings (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. ) of Dynegy, Inc (DYN dyn abbr. dyne ) and Dynegy Holding, Inc. (DHI DHI see dairy herd improvement. ) to 'B' from 'B-' and removed the ratings from Rating Watch Evolving. The Rating Outlook of DYN and DHI is Stable. In addition, the senior secured bonds of Sithe Independence Funding Corp, a separately secured project financed entity owned by DNY DNY display area code (NYX) routing (US DoD) DNY Downstate New York , have been upgraded to 'BB' from 'BB-'. Approximately $3.2 billion of outstanding debt is affected by today's rating action. The rating upgrades are based upon the expectation of an improved risk profile of the companies upon the acquisition of 8,184 MWs of generation assets from the LS Power Group (LSP LSP - Label Switched Path ) and expectation that DYN, as an owner of wholesale power assets, will benefit from higher pricing in wholesale power markets as reserve margins continue to tighten and existing hedges are replaced at current market prices. Fitch expects liquidity will be sufficient to meet needs for the next several years. The acquisition of the LSP assets would result in a generation asset mix that will be more diverse in terms geography, fuel and dispatch. Additionally, the acquisition of the LSP assets will result in a reduction of DYN's commodity price exposure as the output of most of the LSP assets are hedged or contracted. The reduction in the consolidated risk profile stemming from the addition of the LSP assets is partially offset by increased commodity risk exposure from the company's Illinois base load plants as a fixed price contract for those assets expired at year-end 2006. However, Fitch expects the expiration of DYN's contract with Illinois Power to increase EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become by $60 million to $70 million in 2007 as the fixed price in the former contract was approximately 40% below current market prices. Moreover, the Midwest assets include relatively efficient base-load coal plants that are expected to run when available. Fitch's ratings concerns include the projected high leverage for the combined merger company with estimated debt-to-EBITDA for the year ending 2007 to be 5.75 to 6.0 times. In addition, Fitch will be looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. a demonstrated ability to effectively manage commodity risk exposure especially in light of its increased price risk exposure for its Illinois assets as well as the need to manage LSP's hedged positions. DYN is engaged in the generation and sale of wholesale electric power. DYN owns approximately 11,739 megawatts of wholesale power assets. LSP owns and operates approximately 8,305 megawatts of wholesale power assets. The generation portfolio of the combined company would be located in the Midwest (47.4% of capacity), West (33.6%) and Northeast (19.0%). Affected Ratings: Dynegy Inc. --IDR upgraded to 'B' from 'B-'. Dynegy Holdings, Inc. --IDR upgraded to 'B' from 'B-'; --Secured bank facilities upgraded to 'BB/RR1' from 'BB-/RR1'; --Second priority notes upgraded to 'BB/RR1' from 'B+/RR1'; --Senior unsecured upgraded to 'B+/RR3' from 'B-/RR4'. Dynegy Capital Trust I --Trust preferred upgraded to 'CCC+/RR6' from 'CCC/RR6'. Sithe Independence Funding Corp. --Secured bonds upgraded to 'BB' from 'BB-'. Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery. 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. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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