Moody's cuts Energy Future outlook to negative

Moody's Investors Service said it changed the outlook for Energy Future Holdings Corp. and its primary operating subsidiary, Texas Competitive Electric Holdings Co. LLC, to negative from stable.

The outlook for Energy Future's regulated transmission and distribution utility, Oncor Electric Delivery Co. LLC, is not affected by this action and remains stable while Energy Future's speculative-grade liquidity rating is affirmed at SGL-3.

The negative outlook for both is primarily related to an abrupt and unexpected change in management's corporate finance policies, namely, the decision to elect the non-cash payment-in-kind interest option on $4.25 billion of senior unsecured PIK Toggle notes, the agency said.

"Moody's considers the decision to elect this option as indicative of a fundamental deterioration in the credit profile of the company," said Jim Hempstead, senior vice president.

"We had previously incorporated a view, which Moody's understood was also shared, until recently, by both Energy Future's Sponsor Group and executive management team, that the PIK Toggle option would only be utilized as an insurance policy against a material reduction in natural gas commodity prices from the company's original expectations."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.