Fitch to Rate Reliant Energy's $1.25B Notes 'B+/RR2'.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. expects to assign a 'B+/RR2' rating to Reliant Energy Reliant Energy, Inc., based in Houston, Texas, is a non-utility, retail and wholesale electricity provider. In Texas, it provides service to nearly 1.9 million retail electricity customers, including residential and small business customers and commercial, industrial, , Inc.'s (Reliant) planned $1.25 billion issuance of senior unsecured notes. Fitch currently assigns a 'B' Issuer Default Rating to Reliant with a Stable Rating Outlook. The 'RR2' Recovery Rating (RR) indicates superior recovery prospects, 71% to 90% of principal, in the event of a default. The expected 'B+' senior unsecured rating is based on Fitch's recently updated RR analysis (see press release published on May 18, 2007) which resulted in the following rating actions: --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) affirmed at 'B'; --Senior secured debt upgraded to 'BB/RR1' from 'BB-/RR2'; --Senior subordinated convertible notes affirmed at 'B/RR4' and simultaneously withdrawn. The Rating Outlook is Stable. In the planned transactions, Reliant will use cash on hand of approximately $355 million and proceeds from the new debt to fund the tender offer for $1.1 billion of 9.25% and 9.5% senior secured notes and repay its $400 million secured term loan. In addition, Reliant plans to replace its existing revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and pre-funded letter of credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities with smaller facilities of $500 million and $250 million, respectively. The upgrade of the senior secured debt was based on an updated RR analysis. Higher forward wholesale market prices have increased valuations for Reliant's merchant generation portfolio. Fitch's recent affirmation of Reliant's IDR reflects the uncertainty of operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. generated by an unhedged merchant portfolio and a retail business facing increased competition. Reliant's challenge is to maintain stable retail margins with the expiration of price-to-beat in Texas. A substantial decline in retail margins and/or a decrease in customer retention could lead to a negative rating action. Fitch's Recovery Ratings (RR) are a relative indicator of creditor recovery prospects on a given obligation within an issuers' capital structure in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors can be found at www.fitchratings.com/recovery. 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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