Based on the successful completion of two revolving bank loans and a third bank loan for its communications operating lease, the credit ratings of Dynegy Inc. and its subsidiaries were removed from CreditWatch by Standard & Poor’s Ratings Services (S&P) on Wednesday.

S&P affirmed its “B” corporate credit ratings on Dynegy and assigned a “B+” rating for Dynegy Holdings Inc.’s new $1.66 billion senior secured credit facility. The Houston-based company has $5.454 billion of debt outstanding, and S&P said Dynegy’s outlook remained negative.

“The successful completion of the new bank facility relieves some concerns regarding Dynegy’s liquidity position because it renews a significant amount of bank line capacity,” said John Kennedy, an S&P analyst. “However, the negative outlook reflects our uncertainty regarding Dynegy’s ability to generate sustainable cash flow, given the current environment in electric generation, as well as the price volatility in gathering and processing of natural gas liquids.”

Kennedy said that “given the firm’s current weak financial profile, adverse economic conditions could result in thinner margins on generation and gathering and processing of natural gas liquids, which, in turn, could stress Dynegy’s ability to produce reliable cash flow and meet debt service obligations.”

The analyst said the rating stability and/or upward ratings momentum is “principally predicated on the predictability and sustainability of cash flows to meet debt service obligations commensurate with the level of risk inherent in the company’s business strategy.”

The secured bank loan rating, said S&P, is supported by an analysis “that the quality and dollar value of the collateral package underpinning the $1.66 billion senior secured credit facility indicates a strong likelihood of substantial recovery of principal in the event of a default or bankruptcy.”

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