Fitch puts Dynegy on watch

Fitch Ratings said it placed Dynegy Inc. and Dynegy Holdings, LLC on Rating Watch negative following news of its planned $1.25 billion exchange offer.

Fitch said it views the proposed exchange offer to be a distressed debt exchange.

Separately, Fitch said it affirmed the issuer default rating and senior secured ratings on Dynegy Midwest Generation, LLC's $600 million and Dynegy Power, LLC's $1.1 billion term loans.

Fitch also said it withdrew the ratings for Sithe Independence Funding Corp., which has successfully tendered for about 99.7% of its outstanding debt.

The agency said it believes that the exchange offer represents a material reduction in value versus the original unsecured bond terms, as the exchange offer represents a significant discount to original bond value.

Additionally, this bond exchange offering is part of an ongoing restructuring, which was initiated to increase financial flexibility and attempt to avoid bankruptcy, Fitch said.

The ratings continue to reflect the high probability of default or further forced restructuring of the company's unsecured obligations, the agency added.

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