S&P cuts UPC Polska

Standard & Poor's downgraded UPC Polska Inc. including cutting its $100 million 14.5% senior discount notes due 2009 and $125 million 14.5% discount notes due 2008 to D from C.

S&P said the downgrade follows the company's announcement that it filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York.

Moody's cuts some PG&E National Energy ratings

Moody's Investors Service downgraded PG&E National Energy Group, Inc.'s senior implied rating to Caa3 from Caa2 and confirmed its senior unsecured ratings at Ca. Moody's also cut subsidiary PG&E Gas Transmission, Northwest Corp.'s senior unsecured rating to B2 from B1 and USGen New England, Inc.'s debt to Caa3 from Caa1. The outlook is negative for all three.

Moody's said the actions follow National Energy's announcement that it and certain subsidiaries had voluntarily filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The downgrades reflect the uncertainties resulting from the bankruptcy proceedings as well as the poor conditions in the merchant wholesale power market that could hamper the company's restructuring efforts, Moody's said. The rating actions incorporate Moody's expectations about the prospects for recovery among the various classes of creditors among the National Energy group of companies.

The downgrade and negative outlook for Gas Transmission Northwest's rating incorporate Gas Transmission Northwest's affiliation with a bankrupt entity and the contingent liabilities from its guarantees of the trading and tolling obligations of PG&E Energy Trading Holdings Corporation, National Energy's energy trading subsidiary which is in bankruptcy. However, Gas Transmission Northwest's ratings also recognize certain protections provided its creditors by its ringfenced structure and covenants that limit the level of dividends that can be paid to National Energy and require unanimous board approval, including that of an independent member, to put Gas Transmission Northwest into bankruptcy. Gas Transmission Northwest enjoys a sound stand-alone financial profile, and Moody's believes that it has sufficient debt and borrowing capacity to finance a reasonable range of liquidity calls that could materialize out of these guarantees.

The Caa3 ratings for USGenNE reflect the possible recovery value based upon the underlying assets, Moody's said. The assets of USGenNE comprise a portfolio of generating plants in New England. A portion of the portfolio benefits from power sales to creditworthy utilities. However, continued oversupply in the wholesale power market may undermine uncontracted revenues as well as the value of the company's assets.

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