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UPDATE: S&P Raises Dynegy (DYN) to 'B+' Following Duke Energy Deal; Outlook Stable

August 22, 2014 3:27 PM EDT
(Updated - August 22, 2014 3:44 PM EDT)

Standard & Poor's Rating Services said today it raised its corporate credit rating on Dynegy Inc. (NYSE: DYN) to 'B+' from 'B' based on our expectations of lower business risk with the acquisition of about 12,300 MW of merchant power plants in the U.S. We raised Dynegy's senior secured debt rating to 'BB', but left the recovery rating unchanged at '1'. We affirmed Dynegy's senior unsecured debt rating at 'B+', but revised the recovery rating to '3' from '2' based on our expectation that Dynegy will issue substantial senior unsecured debt to help fund some of the acquisition cost. The outlook is stable.

The ECP assets include project finance entity EquiPower Resources Holdings LLC, which has debt we rate. We expect this debt will be retired when the acquisition is finalized and will withdraw the rating on this EquiPower debt at that time.

"The acquisitions will improve Dynegy's scale and market diversity materially by adding a large footprint in the favorable PJM and NePool power markets where Dynegy has limited presence," said Standard & Poor's credit analyst Terry Pratt.

The stable outlook reflects our conclusion that Dynegy will complete the acquisitions under the planned capitalization profile of new senior unsecured debt and equity issuance.

If Dynegy cannot complete either the Duke or ECP asset acquisitions, or if the new senior unsecured debt to fund the acquisitions is materially higher than our expectations, then we would likely downgrade the corporate credit rating to 'B'

We do not contemplate any improvement in the rating in the forecast period. An upgrade would require another material reduction in business risk or improvement in financial performance--likely of FFO to debt well above 12x. We think these developments are unlikely.



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