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Fitch rates Dynegy notes B+
Fitch Ratings said it assigned B+ ratings to Dynegy Holdings Inc.'s $1.1 billion 7¾% unsecured notes due 2019 and $550 million 7½% unsecured notes due 2015.
The outlook is stable.
The proceeds of the notes will be used to refinance secured project finance debt relating to assets recently acquired from the LS Power Group.
The agency said Dynegy's B issuer default rating reflects an improved risk profile of the company due to the recent acquisition of 8,305 megawatts of generation assets from the LS Power and the expectation that Dynegy will benefit from higher pricing in wholesale power markets over the next several years as reserve margins continue to tighten.
Fitch's rating concerns include the projected high leverage for the combined merged company, with an estimated debt-to-EBITDA ratio for the year ending 2007 of 5.75x to 6x, and the agency said it will be looking for a demonstrated ability to manage commodity risk exposure effectively, especially in light of the expiration at the end of 2006 of the fixed priced contract for Dynegy's Illinois power output that was only partially replaced in the Illinois auction.
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