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14 Sep 2010
Approximately $2 billion of debt securities and affected
New York, September 14, 2010 -- Moody's Investors Service assigned a Baa2 rating to Edison International's
(EIX) planned issuance of senior notes and assigned a (P) Baa2 rating
to the shelf registration for EIX's issuance of senior unsecured
notes. Concurrent with these rating assignments, Moody's
affirmed all of EIX's ratings, including its Issuer Rating
and senior unsecured bank credit facility at Baa2. The rating outlook
for EIX is stable.
..Issuer: Edison International
....Senior Unsecured Regular Bond/Debenture,
....Senior Unsecured Shelf, Assigned
EIX's Baa2 senior unsecured rating considers the relatively stable financial
performance expected at Southern California Edison Company (SCE:
A3 senior unsecured; stable outlook), the principal source
of cash flow and earnings for the next few years; a fairly conservative
dividend payout ratio; a business strategy primary focused around
growing the regulated utility business which comes with a substantially
increasing capital investment program at SCE; and the challenging
prospects for Edison Mission Energy (B3: senior unsecured;
negative outlook), its unregulated wholesale power generation subsidiary.
The rating factors in the structural subordination at EIX as a holding
company, whose primary source of dependable cash flow are dividends
from SCE. Our rating recognizes continuing evidence of a more predictable
and credit supportive state regulatory environment in California,
which helps to mitigate the financial impact of a weakened service territory
economy. Given the substantial increase in capital investment over
the next five years, SCE's and EIX prospective credit metrics
are likely to be weaker than recent historical results. Also,
we expect the size of the utility's capital investment program to
impact the amount of dividends that can be upstreamed to the holding company
during this build-out period at the utility. For more information
on SCE and EME, please refer to the Credit Opinion which can be
found on www.moodys.com under the issuer's name.
Net proceeds from the note offering will be used to repay short-term
borrowings under the company's $1.426 billion unsecured
revolving credit or for general corporate purposes. In light of
the utility's large capital investment program, Moody's believes
that EIX holding company debt may be used as a funding source for the
payment of EIX common dividends. While we view the sustained use
of holding company debt for the payment of dividends as a credit negative,
we observe that EIX does not currently have any long-term funded
debt obligations at the holding company in its capital structure.
However, a heavy reliance on holding company debt for the payment
of EIX dividends during the utility's heavy capital spend years
could negatively impact ratings at EIX and at SCE.
The stable outlook for EIX is largely based upon the stability of its
principal subsidiary, SCE, the parent's moderate dividend
policy, which is balanced by the capital requirements of the organization.
The stable outlook also factors in our belief that management will ultimately
finance this large capital investment program in a conservative manner.
As a holding company that is primarily dependent upon SCE for a substantial
portion of its cash flow in the form of dividends, any change in
SCE's rating is likely but not certain to result in a similar rating action
In light of the size of SCE's capital expenditure program and the company's
ownership of EME, a substantially weaker subsidiary, limited
prospects exist for the rating to be upgraded over the near term.
Longer term, however, should EIX's ratio of consolidated cash
flow to total debt exceed 20% and the ratio of cash flow to interest
expense approaches 5x on a sustainable basis, the rating could be
EIX's ratings could be negatively impacted if the company does not finance
its substantial capital investment conservatively, which at some
point, is likely to include the issuance of common equity.
The rating could also be negatively affected if the ratio of consolidated
cash flow to total debt declined below 18% and the ratio of cash
flow to interest expense fell to 3.5x or less for an extended period.
Moreover, to the extent that EIX provides material direct credit
support for its weaker non-regulated businesses, the EIX
rating is likely to be negatively impacted.
The principal methodology used in rating Edison International was Regulated
Electric and Gas Utilities rating methodology published in August 2009.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
Headquartered in Rosemead, CA, EIX is an integrated energy
holding company with assets at June 30, 2010 of $43.9
billion, that provides electric utility services through its 100%
owned utility, SCE. EIX also conducts its unregulated businesses
through Edison Mission Group, whose principal asset is EME,
an unregulated wholesale power company.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
Michael G. Haggarty
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Baa2 to EIX's senior notes and affirms ratings; outlook stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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