Fitch: Reliant Ratings Unchanged After Agreement to Sell NYC Generating Assets.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Reliant Energy, Inc. (RRI RRI Radio Romania International RRI Raman Research Institute RRI Resource Renewal Institute RRI Robarts Research Institute RRI Research Reactor Institute RRI Renal Research Institute (USA) RRI Rights and Resources Initiative ) announced today that it reached a definitive agreement to sell its New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. based generating portfolio for $975 million in cash to a private investor group led by Madison Dearborn Partners and U.S. Power Generating Co. The assets to be sold consist of 2,100 megawatts (MW) of natural gas and oil fired generating capacity. Fitch maintains the following credit ratings for RRI: -- Senior secured debt 'BB-'; -- Senior unsecured debt 'B+'; -- Convertible senior subordinated notes 'B'. The Rating Outlook remains Positive. In the near-term, Fitch believes that the planned asset divestiture will have neutral credit implications for RRI and therefore has no impact on its current ratings and Rating Outlook. While RRI's stated intention is to utilize proceeds from its ongoing asset sale program to reduce outstanding debt, the credit agreement governing RRI's outstanding senior secured term loan permits the company to retain up to $300 million of proceeds in any given year for general corporate purposes (subject to a cumulative cap of $750 million). Given the recent impact of natural gas price spikes on RRI's cash margining requirements combined with the pending $150 million cash payment relating to RRI's settlement of California related litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , overall debt retirement related to the asset sale could be limited to approximately $675 million. Consequently, the impact of the sale on RRI's consolidated leverage ratios could ultimately prove to be immaterial especially when taking into consideration the loss of future earnings and cash flow from the NYC NYC abbr. New York City NYC New York City generating portfolio. The transaction is slated to close by March 31, 2005 and is subject to Hart Scott Rodino review and regulatory approval by the FERC FERC Federal Energy Regulatory Commission FERC FEMA Emergency Response Capability and the New York Public Service Commission. Fitch will continue to monitor developments related to the sale as well as RRI's overall progress in achieving its stated goals for reducing debt leverage in the coming years. The continued Positive Rating Outlook for RRI reflects the expectation that ongoing cost-saving and balance sheet deleveraging initiatives will result in gradual improvement in consolidated credit measures through 2006, even under a scenario that assumes limited recovery in current wholesale power market conditions and lower levels of retail energy cash flow performance. The Outlook also assumes that all remaining investigations and litigation, which are now focused primarily on the unresolved April 2004 criminal indictment of RRI's wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. Reliant Energy Services, will ultimately be settled in a manner that will not have a substantially adverse near-term impact on the company's overall liquidity. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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