CHICAGO, May 9 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
reaffirmed Reliant Energy Resources Corp.'s (Resources) $350 million
commercial paper program at 'D-2' (D-Two). Resources' outstanding senior
unsecured notes rated 'BBB+' (Triple-B-Plus) and convertible subordinated
debentures and convertible trust preferred rated 'BBB' (Triple-B) remain on
Rating Watch-Down. Resources' long-term indebtedness was placed on Rating
Watch-Down following its parent, Reliant Energy's (REI) February 2000
$2.1 billion definitive purchase agreement for certain Sithe Energies' assets.
The Rating Watch-Down status reflects the uncertainty surrounding the
ultimate outcome of the credit quality of Resources' long-term debt
obligations as a result of REI's announced intention to sell certain assets of
Resources. Operations earmarked for sale include Resources' two
FERC-regulated interstate pipeline subsidiaries and its Arkla and Minnegasco
gas distribution operations. Resources' Houston-based gas distribution
subsidiary, Entex, will be retained. On a combined basis, operations targeted
for sale accounted for roughly 60 percent of Resources' 1999 operating income.
While the sale will provide additional funds to support debt reduction and/or
growth initiatives at REI, a proportionately higher percentage of Resources'
earnings and cash flow will be derived from more volatile energy marketing and
trading activities resulting in potentially greater credit risk. DCR expects
to discuss further with management the proposed capital structure and
operating profile of Resources on a post asset divestiture basis.
Resources (formerly NorAm Energy Corp.) is a wholly owned subsidiary of
REI and is engaged in the business of natural gas distribution, transmission,
and energy marketing and trading. DCR rates REI's outstanding first mortgage
bonds 'A-' (Single-A-Minus) and its senior unsecured debt 'BBB+'
(Triple-B-Plus). For a more detailed analysis of REI, please refer to a
separate DCR press release dated May 9, 2000.
SOURCE Duff & Phelps Credit Rating Co.
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CONTACT:
John O'Connor, 312-368-2059, or Hugh Welton,
212-908-0746, or Ellen Lapson, 212-908-0504, all of Duff & Phelps
Credit Rating Co.
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