S&P rates Xcel convert BBB-

Standard & Poor's assigned a BBB- rating to Xcel Energy Inc.'s $230 million 7.5% convertible senior notes due 2007, but the rating was placed on watch with developing implications.

Xcel's BBB corporate credit rating also is on watch with developing implications, in response to the outcome of creditor negotiations at subsidiary NRG Energy Inc.

It is not known what the implications would be for Xcel if negotiations fail and NRG files for bankruptcy. There are strong legal arguments against substantive consolidation of the utilities, and by extension, the holding company, into an NRG bankruptcy.

S&P upgrades Coeur D'Alene

Standard & Poor's upgraded Coeur D'Alene Mines Corp. including raising its $100 million 6.375% convertible subordinated debentures due 2004 and $125 million 7.25% convertible subordinated debentures due 2005 to CCC from D. The outlook is negative.

S&P said the upgrade follows completion of Coeur D'Alene's debt restructuring.

The restructuring involved repayment of the company's 6% convertible subordinated debentures due June 2002 and exchanging the majority of its outstanding 7¼% and 6 3/8% convertible subordinated debentures due in 2005 and 2004 for 13.375% convertible senior subordinated notes due Dec. 31, 2003 (series I and II). The 13.375% notes were offered with a lower par value and are convertible in common stock of the company at any time at an exercise price of $1.35. Approximately $21.4 million of the 13 3/8% notes remained outstanding as of Sept. 30, 2002, of the original issue of $64.7 million.

As a result of its exchange offer and the subsequent conversions, Coeur D'Alene's debt has now declined by $80 million to $105 million at Sept. 30, 2002, S&P said. Despite these actions, refinancing risk is significant, as $65 million of the 6.375% debentures and $14 million of the 7.25% debentures that were not exchanged mature in January 2004 and October 2005 respectively.

Ratings on Coeur reflect its limited liquidity, near-term refinancing risk and its high cost position, S&P said.

Coeur D'Alene's liquidity was limited to $7 million in cash and cash equivalents at Sept. 30, 2002, S&P noted. The company does not have a revolving credit facility.

Coeur will need to access alternative financing in the next year, as its cash flows at current silver and gold prices will be inadequate to fund its $65 million debt payment in January 2004, S&P said, adding that it is concerned that given Coeur D'Alene's questionable access to capital markets, the company may need to seek another exchange offer, which could precipitate a default if the company does not fully cover its interest and principal.

S&P cuts Reliant Resources

Standard & Poor's downgraded Reliant Resources Inc. and subsidiaries and changed the CreditWatch to developing from negative. Ratings affected include Reliant Resources Inc.'s corporate credit rating, cut to B+ from BB+, Orion Power Holdings Inc.'s $200 million 4.5% convertible senior notes due 2008 and $375 million 12% senior notes due 2010, cut to B- from BB-, and Reliant Energy Mid-Atlantic Power Holdings LLC's $210 million 8.554% passthrough certificates series A due 2005, $220 million 9.681% passthrough certificates series C due 2026 and $421 million 9.237% passthrough certificates series B due 2017, cut to B+ from BB+.

S&P said the action is pending the refinancing of holding company debt and credit facilities of $5.9 billion, including a $1.4 billion synthetic lease.

While S&P said it continues to believe that Reliant Resources has a strong likelihood of executing its refinancing plans, its lack of ability to cite strong commitments from its banks prior to the maturity of the $2.9 billion bank facility in February 2003 puts heightened stress on the company's rating.

The CreditWatch Developing means the ratings could go either up or down, potentially to D, if Reliant cannot renew at a minimum, the $2.9 billion facility, S&P said.

Reliant does not have sufficient cash on hand to repay the facilities and thus, is dependent on its lenders to renegotiate the debt, S&P said. Reliant expects to pay a higher rate, provide collateral, and be required to meet greater cash restrictions under the renewed facilities.

However, Reliant hopes to gain an extension of the facilities, which would provide an opportunity to refinance in the capital markets over time and also pay down debt.

If the refinancing is accomplished, ratings for Reliant Resources, Reliant Energy Mid-Atlantic and Orion Power will be immediately upgraded to the BB range pending a review of the terms.

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