S&P: Dynegy on developing watch

Standard & Poor's said it placed its B/B-2 corporate credit rating on Dynegy Inc. on CreditWatch with developing implications as a result of the announced sale of the firm's midstream business to Targa Resources Inc. for $2.35 billion.

S&P said the watch reflects the uncertainty regarding the use of the proceeds from the midstream sale as well as the sustainability of Dynegy's remaining business lines.

Notably, a substantial amount of sale proceeds could be used to significantly lower debt levels and improve the company's financial profile, which would be conducive for credit quality, the agency noted.

Conversely, Dynegy has stated that some proceeds could be used to fund strategic growth opportunities. S&P said it cannot determine at this time the level of debt reduction, above the required $783 million stipulated in its bank agreements, or the amount, nature and credit risks of any potential investments.

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