New York, September 17, 2002 — Moody’s Investors Service recently lowered the senior unsecured debt rating of NRG Energy, Inc. to Ca from Caa1. The rating outlook is negative.
Ratings downgraded are:
? NRG Energy, Inc. senior unsecured to Ca from Caa1, and Senior Implied to Caa3 from B3;
? NRG Energy Pass-Through Trust 2000-1 remarketable or redeemable securities to Ca from Caa1;
? NRG Energy Shelf Registration to (P)Ca from (P) Caa1, and (P)C from (P)Caa3
Moody’s believes that there is an increasing probability that NRG will default on debt service obligations. The downgrade and the negative outlook reflect weak operating cash flows at NRG and at a number of its operating projects, weak liquidity that is highly dependent upon asset sales, and significant collateral requirements that remain unsatisfied requiring additional forbearance from creditors.
The current waiver with the bank group expired on September 13, 2002. Asset sales, which are intended to improve liquidity and help meet collateral requirements, remain challenging given the number of properties that are on the market.
NRG announced last week the sale of some of its eastern European properties, which if completed, would provide nearly $200 million to NRG by year-end. Other asset sales announcements are expected shortly.
Still, the process is likely to take months to execute and does little, in the near term, to bolster liquidity. Further, NRG’s parent, Xcel Energy (Sr. Uns. at Baa3; on review for downgrade) is constrained by its credit agreement and by terms of the Public Utility Holding Company of 1935 as to the amount of incremental support that it can provide to NRG.
The Ca senior unsecured debt rating also incorporates modest expected recovery for bondholders under a default scenario and factors in the significant degree of structural subordination that exists for creditors at NRG due to the amount of debt that exists at wholly-owned projects and subsidiaries of NRG.
Of the $9.8 billion of consolidated NRG debt, approximately $5.8 billion represent debt issued at wholly-owned operating subsidiaries or projects, with the remaining $4.0 billion issued at NRG, the holding company.
Headquartered in Minneapolis, MN, NRG is a wholly-owned subsidiary of Xcel Energy, Inc.