Moody's Investors Service lowered its debt ratings Monday on utility company Dynegy Holdings Inc., in anticipation of a management shake-up on the company's board this summer.
Moody's downgraded Houston-based Dynegy's debt to Caa3, the ninth-lowest level of non-investment grade debt, from Caa1. The rating affects Dynegy's corporate family rating, along with the ratings of various affiliates. Moody's rating outlook for Dynegy is "negative."
Moody's said there is uncertainty around the company's leadership because Dynegy's board of directors does not plan to stand for reelection at the company's shareholder meeting in June.
Four of the directors that will sit on Dynegy's future board represent investment company Icahn Enterprises, which now has the option to own up to 19.9 percent of the company's stock.
"While information remains limited about the long-term intentions of the board, we believe that default risk, through some form of distressed debt exchange, has increased with this change in corporate governance," Moody's said in a statement.
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