Cons Natural Gas Debentures Lowered to `AA-' By Fitch IBCA.NEW YORK--(BUSINESS WIRE)--Sept. 16, 1999-- Consolidated Natural Gas Co.'s (CNG CNG Compressed Natural Gas CNG Calling (Tone) CNG Comfort Noise Generation CNG Cryptography Next Generation (Microsoft Windows Vista) CNG Centre National de Génotypage ) outstanding $1.4 billion debentures are lowered to 'AA-' from 'AA' by Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals . This rating as well as CNG's outstanding 'F1+' rated commercial paper (CP) program remain on RatingAlert Negative where they were placed on Feb. 23, 1999, as a result of CNG's announced merger with Dominion Resources Dominion NYSE: D (formerly Dominion Resources) is a power and energy company headquartered in Richmond, Virginia, USA, that supplies electricity, natural gas, or other energy services to homes in Virginia, West Virginia, Ohio, Pennsylvania, and eastern North Carolina. Inc. (DRI See Digital Research. ). A RatingAlert-negative indicates the ratings could be lowered or affirmed in the near term. Fitch IBCA rates DRI's senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. at `BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +' and its CP at 'F2'. DRI's ratings remain on RatingAlert-evolving, which indicates that the ratings may be raised, lowered or affirmed in the near-term. The lowering of CNG's debentures reflects the company's increased risk profile associated with the continued growth of its non-regulated business activities as well as CNG's pending merger with lower-rated DRI. DRI and CNG ultimately expect to receive SEC approval of their proposed merger structure whereby CNG becomes a first-tier subsidiary of DRI. Under this structure, CNG will remain a self-financing entity with outstanding debt continuing as a direct obligation of CNG. While this structure significantly insulates CNG bondholders from the financially weaker DRI, the RatingAlert-negative reflects some uncertainty over the ultimate impact on CNG's credit profile resulting from the merger. DRI's financing for the roughly $2.5 billion cash portion of the merger and its recently announced $2.0 billion share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program will increase leverage and could put pressure on DRI's ratings. Along with Virginia Electric and Power Co. (1st mortgage bonds rated 'A+'), CNG will be the primary source of cash flow for DRI. Over the next several years, Fitch IBCA expects CNG to dedicate more than two-thirds of its capital budget toward the further development of its oil and gas exploration and production (E&P) business. These activities generally entail higher risks than CNG's traditional regulated businesses. CNG continues to emphasize E&P projects located in the deepwater Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east region. Although these projects are typically subject to longer lead times and higher development costs, CNG has developed a proven track record of bringing deepwater fields on line and increasing production levels. Moreover, CNG remains one of the E&P industry's lowest cost operators with five year average production costs of approximately $0.35 per thousand cubic feet. Considerable credit strength is derived from CNG's regulated local distribution and interstate natural gas pipeline operations. CNG's mature four-state gas distribution segment should continue to generate a stable and predictable cash flow stream. Furthermore, CNG's regional interstate natural gas transmission system, which includes the nation's largest underground storage network, is well positioned to serve the increasingly competitive Midwestern and Eastern natural gas markets. Although recent performance has been impacted by warmer weather and lower oil and gas prices, Fitch IBCA expects CNG's standalone credit measures to generally remain consistent with the 'AA-' rating. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern interest coverage for the 12 months ended June 30, 1999, approximates 4.0 times (x) with cash coverage of interest at 6.7x. The company's capital structure, including short-term seasonal borrowings, remains conservative at 44% debt and 56% shareholder's equity. |
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