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Rating Action:

MOODY'S UPGRADES ENERGY FUTURE HOLDINGS CORP.'S PDR AND CERTAIN NOTES; AFFIRMS OTHER RATINGS; OUTLOOK REMAINS NEGATIVE

16 Nov 2009

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
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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