Moody's downgrades Dynegy

Moody's Investors Service said it lowered Dynegy Holdings, Inc.'s corporate family and probability of default ratings to Caa1 from B3, senior secured bank credit facility to B1 (LGD1, 6%) from Ba3 (LGD1, 5% and senior unsecured regular bonds to Caa2 (LGD4, 60%) from B3 (LGD4, 58%). The speculative-grade liquidity rating remains SGL-4.

The agency also downgraded NGC Corp. Capital Trust I 's preferred stock to Caa3 from Caa2 and Roseton-Danskammer 2001's senior secured passthrough certificates to Caa2 (LGD4, 60%) from B3 (LGD4, 58%).

The outlook remains negative.

The agency said the probability that Dynegy will be acquired by an affiliate of Blackstone Group LP has increased following the expiration last week of the deal's 40-day go-shop period.

The downgrade factors in the agency's review of filings made with the Securities and Exchange Commission. Moody's said that based on its assessment of these public filings, Dynegy's financial profile is expected to be quite fragile, particularly during 2011 and 2012, when the company is projected to generate both negative operating cash flow and negative free cash flow due to weak operating margins and the required funding of their capital investment programs.

The continuing negative outlook factors in Moody's concern about Dynegy being owned by a private equity firm and the related uncertainty around the sponsor's view surrounding several strategic issues including hedging, capital structure, liquidity and dividend/distribution policies.

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