Moody's upgrades Dynegy

Moody's Investors Service said it upgraded the long-term debt ratings of Dynegy Inc. and its subsidiaries, including the Dynegy Holdings Inc. corporate family rating to B1 from B3, Dynegy Holdings Inc.'s senior secured revolving credit facility to Ba3 from B2, second-priority senior secured global notes to B1 from B3 and senior unsecured debt rating to B2 from Caa2 and Dynegy Inc.'s convertible subordinated debentures to B2 from Caa2. The speculative grade liquidity rating was affirmed at SGL-2.

The outlook is stable.

The upgrade reflects the completion of Dynegy's restructuring over the past several years, which Moody's said has resulted in a more focused merchant power generation company with less debt. It also concludes the rating review announced on May 9, 2005 following the company's announcement that it intended to sell its midstream natural gas liquids business.

The ratings are supported by the company's diversified electrical generation asset base that should benefit from an expected recovery in the power market, management's demonstrated discipline through several years of restructuring the company and its significant cash balances with no near-term maturities, the agency said.

Dynegy's ratings are restrained by the company being in a single line of business that is dependent on improving power markets, its high leverage and ongoing liquidity requirements related to hedging and customer risk management.

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