Fitch Ratings downgraded the debt of Energy Future Holdings Co. (TXU:US), the Texas power company taken private in 2007 in the largest buyout in history. Fitch cut its unregulated subsidiaries to eight levels below junk and said a default appears probable.
Fitch lowered the rating of Energy Future Holdings to CC from CCC, which “implies very high levels of credit risk such that default of some kind appears probable at some point in the future,” the company said in a statement.
The debt of Texas Competitive Electric Holdings Co., Energy Future Intermediate Holding Co. and Energy Future Competitive Holdings Co. was lowered to CC from CCC.
Projected low natural-gas prices, which set the price of power in Texas, are expected to lower earnings at Energy Future Holdings’ generation unit, Fitch said in its statement. Energy Future Holdings’ electricity retail unit, TXU Energy, also has had “significant” customer losses and increased competition may pressure profit margins at the unit, Fitch said.
The “current highly leveraged capital structure” at Energy Future Holdings’ unregulated unit “is no longer sustainable and some kind of default seems inevitable,” according to the report.
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