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Fitch downgrades long-term issuer default ratings of DPL, Dayton Power and Light

Fitch Ratings downgraded DPL Inc.'s long-term issuer default rating to BB+ from BBB- and Dayton Power and Light Co.'s to BBB- from BBB. The outlooks on all the ratings are negative.

The rating agency also removed the ratings from rating watch negative, where they were placed in November after the Public Utilities Commission of Ohio's order to Dayton Power and Light, or DP&L, to terminate its distribution modernization rider.

On Dec. 18, the commission granted DP&L's request to revert to electric security plan 1. "This order, combined with withdrawal of ESP 3 could result in a net EBITDA impact ranging from approximately $30 million to $70 million," Fitch said in a Dec. 23 report.

The rating agency estimated that DPL's funds from operations-adjusted leverage in 2020 could range from high 6x to high 7x. "Further negative rating action is likely if DPL's FFO-adjusted leverage is above 7x on a sustained basis," Fitch said.

DPL's financial profile directly impacts DP&L due to parent-only debt and a lack of strong ring-fencing measures.

DPL and DP&L are subsidiaries of AES Corp.