Fitch to rate Reliant Energy B+

Fitch Ratings said it expects to assign a rating of B+/RR2 to Reliant Energy Inc.'s upcoming issuance of $1.25 billion in senior unsecured notes.

Fitch currently maintains a B issuer default rating for Reliant with a stable outlook.

The company plans to tap into cash of about $355 million and use proceeds from the new debt offering for the tender offer of $1.1 billion of 9¼% and 9½% senior secured notes and to repay its $400 million secured term loan. Reliant also plans to replace its existing revolving credit facility and pre-funded letter of credit facilities with smaller facilities of $500 million and $250 million, respectively, the agency said.

The B+ rating on the planned senior unsecured notes reflects the agency's recently updated analysis, Fitch said. After the analysis, the agency upgraded the company's senior secured debt to BB/RR1 from BB-/RR2 and affirmed the senior subordinated convertible notes at B/RR4.

Fitch said it upgraded the senior secured debt based on higher forward wholesale prices, which increased valuations for the company's merchant generation portfolio. The agency affirmed the issuer default rating because of uncertain operating cash flow due to an unhedged merchant portfolio and a retail business facing increased competition. The company needs to maintain its retail margins and its customer base, or face possible downgrades in its ratings, Fitch said.

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