MOODY'S DOWNGRADES ENRON CORP LONG TERM DEBT RATINGS AND KEEPS THEM UNDER REVIEW FOR DOWNGRADE; SENIOR UNSECURED TO Baa3. LOWERS RATING FOR COMMERCIAL PAPER TO NOT PRIME.
Moody's Investors Service downgraded the senior unsecured debt ratings of Enron Corp to Baa3 from Baa2 and the company's rating for commercial paper to Not Prime from Prime-2. Enron's long term debt ratings remain under review for further downgrade. Moody's actions reflect the company's reduced financial flexibility as a result of a substantial loss of investor confidence.
Enron drew down its bank credit facilities in order to shore up near term liquidity, but faces significant debt maturities over the near term, as well as the potential for increased margin requirements from counterparties of its wholesale trading operation. In addition, uncertainty surrounding the firm's contingent obligations creates increased risk for debtholders.
Moody's said that Enron's well-established wholesale trading franchise and its regulated pipeline businesses have solid operating attributes and generate good cash flow. However, the rating agency concludes that the company may not be able to retain investment grade characteristics. Moody's review will focus on Enron's ability to further improve its liquidity and capital position. The rating agency would view a substantial near term injection of equity capital as a stabilizing event.
Enron is one of the world's largest energy companies with approximately $63.4 billion in energy assets. The company produces electricity and transports natural gas, develops, constructs and operates energy facilities, and markets and delivers physical commodities and financial and risk management services. It is headquartered in Houston, Texas.
Debt securities downgraded are:
Guaranteed Senior Notes (Northern Natural Gas) to Baa3 from Baa1
Senior Unsecured Notes to Baa3 from Baa2
Senior Secured or Conv./Exch. Sr. Sec Shelf to (P)Baa2/(P)Baaa3/(P)Ba2
Senior Subordinated to Ba1 from Baa3
Guaranteed Cum. Trust Preferred to Ba1 from Baa3
Guaranteed Trust Preferred to Ba1 from Baa3
Senior Subordinated Shelf to (P)Ba1 from (P)Baa3
Cum. Guaranteed Preferred Stock to Ba2 from Ba1
Cum Guaranteed Preferred Stock Shelf to (P)Ba2 from (P)Ba1
Commercial Paper to Not Prime from P-2
Marlin Water Trust (Backed Sr. Sec.) to Ba1 from Baa2
Osprey Trust (Backed Sr. Sec.) to Ba1 from Baa3
European Power Limited Company (Sr. Sec.) to B1 from Ba3
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