Moody's drops Energy Future

Moody's Investors Service said it downgraded the probability of default rating for Energy Future Holdings Corp. to Ca from Caa1, downgraded the long-term debt ratings for selected securities of Energy Future and placed the ratings for selected securities of the company's principal subsidiary, Texas Competitive Electric Holdings, on review for possible downgrade.

Simultaneously, Moody's said it affirmed Energy Future's Caa1 corporate family rating and SGL-3 speculative-grade liquidity rating.

The outlook remains negative.

The downgrade of the probability of default rating and the long-term ratings for the selected securities reflect Moody's view that Energy Future's recent debt exchange offer is a distressed exchange, the agency said, adding that it also reflects its belief that the exchange transaction has a high likelihood of closing. During the exchange offer process, the Ca probability of default rating will prevail.

Upon closing of the exchange, the probability of default rating will be repositioned to reflect the limited default that will have occurred and to consider its views that future restructuring activity is likely, Moody's said.

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