S&P cuts TXU to junk

Standard & Poor's said it lowered its corporate credit rating on TXU Corp. to BB from BBB-, along with its senior unsecured debt rating to BB- from BB+. The ratings remain on CreditWatch with negative implications.

The downgrade follows the company's filing of its 10K stating its plan to incur about $24.6 billion in additional debt under a preliminary capital plan that has Kohlberg Kravis Roberts & Co. and Texas Pacific Group acquiring TXU for about $32 billion.

S&P said it rates TXU and its subsidiaries on a consolidated basis, and for this reason, S&P said, it also lowered its corporate credit rating and senior unsecured debt ratings on TXU Energy Co. LLC to BB from BBB-. They also remain on CreditWatch with negative implications.

The agency said it did not lower the BBB- corporate credit, senior secured and senior unsecured debt ratings on TXU Electric Delivery Co. These ratings remain on CreditWatch with negative implications. The reason it did not lower the ratings is due to management's expressed intention to maintain TXU Delivery's current credit rating by various means, S&P said, including a ring-fencing structure to separate it from TXU and affiliates and by a pledge not to increase debt at this entity.

S&P also said it lowered the corporate credit rating on TXU U.S. Holdings Co. to BB from BBB-. The rating also remains on CreditWatch with negative implications.

If the acquisition is successful and the capitalization plan defined by management is established, the agency said it expects to further downgrade TXU and TXU Energy. The corporate credit ratings will likely fall to somewhere in the B category, the agency said.

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