Duke Energy Corporate Units Rated `A' By Fitch.Business Editors NEW YORK--(BUSINESS WIRE)--March 21, 2001 Fitch has assigned an `A' rating to the Duke Energy purchase contract and to the Duke Capital Corp. (Duke Capital) senior notes embedded in Duke Energy Corp.'s offering of corporate units. Duke Energy's obligation to pay quarterly contributions that make up a portion of the return on the corporate units is rated equivalent to the company's preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. at `A'. The senior note represents new debt of Duke Capital and is rated pari passu [Latin, By an equal progress; equably; ratably; without preference.] Used especially to describe creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other. PARI PASSU. By the same gradation. with Duke Capital's outstanding senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. at `A'. Proceeds from the issuance of the corporate units will be used by Duke Capital Corp. for general corporate purposes, including the repayment of short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. . Fitch also lowered the rating on the outstanding preferred and trust preferred stock of Duke Energy Corp. to `A' from `A+'. The rating change reflects the junior position of the preferred stock relative to the company's other securities and the increased amount of junior debt obligations senior or of similar ranking to the preferred securities. The purchase contract contained in the corporate units obligate obligate /ob·li·gate/ (ob´li-gat) pertaining to or characterized by the ability to survive only in a particular environment or to assume only a particular role, as an obligate anaerobe. the holder to purchase shares of Duke Energy common stock on May 18, 2004. The purchase contract pays quarterly cash distributions (contract adjustment payments) at the rate of 2.38% annually that are deferrable until no later than May 18, 2004. The 5.87% senior notes due 2006 of Duke Capital Corp., a wholly-owned subsidiary of Duke Energy Corp., serves as collateral to secure the corporate Unit holders' obligation to purchase common stock under the purchase obligation. The notes will be remarketed in 2003 and proceeds will be used to purchase treasury bonds that will be substituted for the senior notes and pledged as collateral to secure the common stock purchase obligation. Duke Capital is not entitled to defer payments on the Duke Capital senior notes. The ratings reflect Duke Energy's ample equity base and cash flow, the good quality of its assets and management team and the continued reliance on regulated businesses for a majority of earnings before interest and taxes In financial and business accounting, earnings before interest and taxes (EBIT) is a measure of a firm's profitability that excludes interest and income tax expenses.[1] EBIT = Operating Revenue – Operating Expenses + Non-operating Income (EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). ). Over time, the company's aggressive investment strategy and entry into higher risk energy markets, both domestic and global, will reduce the percentage of earnings derived from regulated operations and could negatively result in lower ratings. As of Dec. 31, 2000 the franchised electric business accounted for about 42% of consolidated earnings before interest and taxes (EBIT) and natural gas transmission about 13%. While capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. on non- regulated activities could be substantial, a significant portion will be discretionary. As of Dec. 31, 2000, the consolidated capital structure included 48% debt, 15% subordinated debt, preferred stock and minority interests and 37% common equity. The ratio of EBIT to interest was 4 times (x). |
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