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Reliant’s Speculative-Grade Liquidity Rating Cut

December 01, 2008

Reliant Energy Inc., the owner of power plants in eight U.S. states, had its speculative-grade liquidity rating cut to SGL-2 from SGL-1 by Moody’s Investors Service.

The revision reflects the company’s recent decision to end efforts to secure approximately $1 billion in additional financing, Moody’s said in an e-mailed statement. Reliant said Nov. 26 that it wouldn’t go through with securing new financing because a planned exit from commercial and industrial electricity sales would reduce capital requirements.

Reliant has said it is seeking more time to unwind an agreement whereby Merrill Lynch & Co. provides guarantees and collateral for electricity purchases and other transactions. Reliant announced $1 billion in financing from GS Loan Partners and First Reserve Corp. in September to replace the agreement with Merrill, which is being sold to Bank of America Corp. (BAC:US)

“Reliant’s near-term liquidity needs are unclear at this time,” Moody’s said today in its statement. Moody’s also said that while some assets could be sold in the near term, more valuable ones might take further negotiation.

Reliant, based in Houston, is reviewing strategic alternatives, including a sale of all or part of the company. Merrill agreed to extend a waiver of a working-capital requirement in Reliant’s credit agreement to Dec. 5.

Reliant spokeswoman Pat Hammond didn’t immediately respond to a telephone message seeking comment on the Moody’s downgrade. Moody’s has a Ba3 corporate family rating on Reliant, three levels below investment quality.

Companies can receive ratings of SGL-1, which denotes very good ability to raise cash over the next year; SGL-2, which denotes good ability; SGL-3, adequate; and SGL-4, weak, Moody’s has said.

Reliant fell 80 cents, or 14 percent, to $4.94 today in New York Stock Exchange composite trading. The stock has dropped 81 percent this year.

To contact the reporter on this story: Edward Klump in Houston at

To contact the editor responsible for this story: Tony Cox at

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