Approximately $43 billion of credit facilities and debt affected
New York, November 16, 2009 -- Moody's Investors Service has upgraded Energy Future Holdings Corp.'s
(EFH) Probability of Default Rating (PDR) to Caa2 from Ca. EFH's
Caa1 Corporate Family Rating (CFR) is affirmed. EFH's speculative
grade liquidity rating of SGL-3 is affirmed. The rating
outlook remains negative.
On October 5, 2009, Moody's downgraded the PDR to Ca
from Caa1 to reflect our expectation that EFH's debt exchange offer
was highly likely to be completed, and that the transaction would
be considered a distressed exchange. The exchange offer expired
on November 10th and less than 10% of the exchange offer was accepted
by holders. Approximately $357.5 million of debt
is expected to be exchanged for roughly $256.5 million of
new debt securities.
"The exchange results, which account for less than 1%
of total consolidated debt is not considered material for default avoidance
and therefore we do not consider this transaction to be a distressed exchange"
said Jim Hempstead, Senior Vice President. "As a result,
Moody's has not recorded a limited default for EFH."
The Caa2 PDR has not been restored to its previous level of Caa1 to reflect
our view that the prospect for additional restructuring activity is highly
likely. The Caa1 CFR and negative rating outlook reflect our concerns
regarding the long term sustainability of EFH's business model given
its untenable capital structure. These concerns primarily reflect
the approximately $43 billion of consolidated debt outstanding
on the balance sheet. We observe that EFH's cash flow generating
ability amounts to less than 5% of total debt outstanding.
In accordance with our Loss Given Default (LGD) methodology, the
ratings and LGD assessments for EFH, Energy Future Intermediate
Holdings Company (EFIH) and Texas Competitive Electric Holdings (TCEH)
are as follows:
EFH's new $0.1155 billion 9.75% Sr.
Secured Notes due 2019 and EFIH's (and EFIH Finance) new $0.1411
billion 9.75% Sr. Secured Notes due 2019 are assigned
a Caa3 rating, LGD5 (78%). The Caa3 rating reflects
the generally senior unsecured nature of the cash flows available to meet
these debt service obligations. We include EFIH as part of the
EFH family and reflect no rating benefit associated with the rate-regulated
T&D utility operations at Oncor or the security interests in Oncor's
parent organizations. Prospectively, we incorporate a view
that the debt outstanding at EFIH will increase over the near-term,
most likely due to additional potential restructuring activities throughout
the EFH family.
EFH's $0.7398 billion 6.50% Series Q Senior
Notes due 2024 have been upgraded to Caa3, LGD 5 (78%) from
Ca, LGD4 (54%) and the $0.7443 billion 6.55%
Series R Senior Notes due 2034 were also upgraded to Caa3, LGD 5
(78%) from Ca, LGD4 (56%).
EFH's $0.9827 billion 5.55% Series P Senior
Notes due 2014 are affirmed at Caa3 and their LGD assessment has been
revised to LGD 5 (78%) to LGD3 (31%).
EFH's $2.6383 billion 11.25% / 12.00%
PIK senior Toggle Notes due 2017 are affirmed at Caa3 and their LGD assessment
has been revised to LGD 5 (78%) from LGD 3 (36%) while EFH's
$1.831 billion 10.875% Senior Notes due 2017
are affirmed at Caa3 and their LGD assessment has been revised to LGD
5 (78%) from LGD2 (27%). Historically, Moody's
provided a one-notch rating benefit to these securities to reflect
the simple payment guarantee associated with EFIH and their ownership
interests in Oncor. We no longer ascribe this benefit, in
part due to the modest increase in capital structure complexity associated
with the collateral that EFIH is now providing to benefit the new 9.75%
senior secured notes at both EFH and EFIH.
TCEH's $2.9441 billion 10.25% Senior Notes
due 2015 and the $1.9128 billion 10.25% Senior
Notes due 2015, Series B are affirmed at Caa2 and their LGD is revised
to LGD 4 (50%) from LGD5 (72%). This concludes the
review for possible downgrade initiated on October 5 because completion
of the exchange offer as proposed would have caused a material shift in
the amount of debt that had a junior priority to these notes in the capital
structure.
TCEH's Senior Secured Bank Credit Facilities are upgraded to B1,
LGD 2 (14%) from B2, LGD2 (28%). The upgrade
reflects our LGD methodology. The increased probability for a default
reflected in our Caa2 PDR versus the Caa1 CFR results in improved recovery
prospects for these secured lenders over the near-term given their
priority in our liability waterfall assessment.
TCEH's 10.5%/11.25% PIK Toggle Notes
are affirmed at Caa2 and their LGD assessment has been revised to LGD
4 (50%) from LGD 5 (72%).
TCEH's senior unsecured revenue bonds are affirmed at Caa3 and their
LGD assessment has been revised to LGD 4 (64%) from LGD 5 (83%).
EFCH's senior unsecured bonds/debenture are affirmed at Caa3 and
their LGD assessment has been revised to LGD 4 (67%) from LGD 5
(86%).
EFH's rate-regulated electric transmission and distribution
(T&D) utility, Oncor Electric Delivery Company's (Oncor),
Baa1 senior secured ratings are affirmed. The rating outlook for
Oncor remains stable. EFH's SGL-3 rating implies adequate
liquidity over the next twelve months. In our opinion, liquidity
is benefited by a current large cash balance, meaningful availability
under its existing TCEH credit facilities, no material near-term
maturities until 2014 and a modest capital expenditure plan.
Moody's last rating action for EFH occurred on October 5, 2009,
when EFH's PDR was downgraded to Ca from Caa1.
For more information, please refer to Moody's credit opinion under
www.Moodys.com.
The principal methodology used in rating EFH was Rating Methodology:
Unregulated Utilities and Power Companies. It can be found at www.moodys.com
in the Credit Policy & Methodologies directory, in the Ratings
Methodologies subdirectory. Other methodologies and factors may
have been considered in the process of the rating these issuers can also
be found in the Credit Policy & Methodologies directory.
EFH is a large merchant generation company and retail electric provider
operating in Texas. EFH is headquartered in Dallas, Texas.
Downgrades:
..Issuer: Energy Future Holdings Corp.
....Senior Unsecured Regular Bond/Debenture,
Downgraded to LGD5, 78% from a range of LGD3, 36%
to LGD2, 27%
..Issuer: TXU Corp. (Old)
....Senior Unsecured Regular Bond/Debenture,
Downgraded to LGD5, 78% from a range of LGD4, 56%
to LGD3, 31%
..Issuer: TXU US Holdings Company
....Senior Unsecured Regular Bond/Debenture,
Downgraded to Caa3 from Caa2
Upgrades:
..Issuer: Brazos River Authority, TX
....Revenue Bonds, Upgraded to LGD4,
64% from LGD5, 83%
....Senior Unsecured Revenue Bonds,
Upgraded to LGD4, 64% from LGD5, 83%
..Issuer: Energy Future Holdings Corp.
....Probability of Default Rating, Upgraded
to Caa2 from Ca
..Issuer: Sabine River Authority, TX
....Senior Unsecured Revenue Bonds,
Upgraded to LGD4, 64% from LGD5, 83%
..Issuer: TXU Corp. (Old)
....Senior Unsecured Regular Bond/Debenture,
Upgraded to Caa3 from Ca
..Issuer: TXU US Holdings Company
....Senior Unsecured Regular Bond/Debenture,
Upgraded to LGD4, 67% from LGD5, 72%
..Issuer: Texas Competitive Electric Holdings Co LLC
....Senior Secured Bank Credit Facility,
Upgraded to a range of B1, LGD2, 14% from a range of
B2, LGD2, 28%
....Senior Unsecured Regular Bond/Debenture,
Upgraded to LGD4, 50% from LGD5, 72%
....Senior Unsecured Sec. Lease Oblig.
Bond, Upgraded to a range of Caa2, LGD4, 50%
from a range of Caa3, LGD5, 86%
..Issuer: Trinity River Authority, TX
....Senior Unsecured Revenue Bonds,
Upgraded to LGD4, 64% from LGD5, 83%
Assignments:
..Issuer: EFIH Finance Inc.
....Senior Secured Regular Bond/Debenture,
Assigned a range of 78 - LGD5 to Caa3
..Issuer: Energy Future Holdings Corp.
....Senior Secured Regular Bond/Debenture,
Assigned a range of 78 - LGD5 to Caa3
Confirmations:
..Issuer: Texas Competitive Electric Holdings Co LLC
....Senior Unsecured Regular Bond/Debenture,
Confirmed at Caa2
New York
James Hempstead
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
William L. Hess
Managing Director
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
MOODY'S UPGRADES ENERGY FUTURE HOLDINGS CORP.'S PDR AND CERTAIN NOTES; AFFIRMS OTHER RATINGS; OUTLOOK REMAINS NEGATIVE