Dynegy Sizzles With New Issuance; Plastics Co. Cracks

Dynegy Holdings' issuance of new second-priority senior secured notes has led Standard & Poor's to raise the rating on its $1.3 billion credit facility and term loan "B" from B+ to BB-. The new debt will be used to pay off the electricity and natural gas provider's $200 million "A" term loan, the $696 million Black Thunder senior secured facility and part of the company's $360 million "B" loan. The elimination of the term loan "A" and the Black Thunder facility will enhance Dynegy's collateral coverage.

While the new transactions diminish some concern surrounding Dynegy's financial flexibility, they do not result in a change in the company's overall credit quality as the ability to generate stable cash flow remains a key concern, noted S&P. The agency has assigned a B- rating to Dynergy's new $1.45 billion second priority senior secured notes and a CCC+ rating to its $175 million 43/4% convertible subordinated debentures due 2023. Calls to Nick Caruso, Dynegy's cfo, were not returned.

* Prolonged weakness in the plastics industry end markets has led Moody's Investors Service to downgrade Milacron's bank debt rating to B3 from B1 and its senior notes to Caa1 from B2. The outlook is negative on the approximately $305 million of debt affected. Poor cash flow performance, liquidity decline by over $20 million versus estimates provided during the preceding quarter and the growing challenge to refinance more than $300 million of upcoming March 2004 and April 2005 debt maturities are reflected in the downgrade, said Moody's. Milacron's revenues are more cyclical and less diversified since its third quarter 2002 sale of its metalworking tools business. "While [the] Moody's report is thorough and fair, we believe our prospects, especially longer-term, are very positive. The willingness shown today of our revolver bank group to relax financial performance covenants and allow us to step up our profit improvement initiatives we believe reflects this as well," said Ronald Brown, chairman and ceo of Milacron.