S&P puts TXU on negative watch

Standard & Poor's said it placed its BBB- corporate credit rating on TXU Corp. on CreditWatch with negative implications.

The action reflects the potential for a buy-out of the company by an investor group led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group for about $32 billion, the agency said.

The CreditWatch placement reflects the likelihood that the acquisition will result in more debt and higher financial obligations for TXU, which could lead to a downgrade of the company, S&P said. It will be resolved prior to completion of the transaction and following analysis of management's initial plan of capitalization and strategy, S&P said.

The rating reflects the consolidated creditworthiness of TXU and its subsidiaries, primarily unregulated TXU Energy Co. LLC and regulated TXU Electric Delivery Co. TXU's rating remains under pressure by credit risk that might arise as TXU continues to develop - through TXU Generation Development Co. LLC - its project to build 11 new coal-fired plants by the end of 2010, the agency added.

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