S&P lowers Reliant outlook to negative

Standard & Poor's said it revised the outlook on the B+ corporate credit rating of Reliant Energy Inc. and its subsidiaries to negative from stable.

"The outlook revision reflects a further weakening of outlook for the retail business, poorer earnings visibility since management needs to implement new risk management policies to achieve greater earnings stability that it has promised, weakening wholesale merchant market conditions, and ongoing liquidity uncertainty since management will eventually move liquidity risks to its balance sheet when the Merrill Lynch credit sleeve eventually winds down (albeit later than expected given last week's announcement) without the benefit of additional capital," said S&P credit analyst Swami Venkataraman.

"We recognize that management is currently in negotiations to possibly sell all or a part of the company to other companies. To the extent a higher-rated buyer emerges, there is upside not currently factored into its ratings."

In its Oct. 3 downgrade of Reliant Energy's rating to B+ from BB-, the agency said it had assumed that retail contribution would decline by a third in 2009 and 2010 compared to prior expectations.

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