This link has been bookmarked by 1 people . It was first bookmarked on 03 Nov 2006, by At the Money.
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03 Nov 06
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The rating could be downgraded if the level of share repurchases continues to increase materially over the next eighteen months without meaningful progress towards reducing consolidated debt or if the company chooses to finance its capital investment program with higher than anticipated levels of debt.
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n light of the negative rating outlook as well as the company's capital investment plan and announced share repurchases, limited near-term prospects exist for the rating to be upgraded. However, the rating outlook could be stabilized if the company's credit if the company makes meaningful progress towards using free cash flow to permanently reduce debt by more than $1.0 billion over the next several years, and if the company finances its anticipated large capital investment program in a relatively conservative manner resulting in a adjusted FFO to total adjusted debt of 16% on a sustainable basis.
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To that end, Moody's also notes that NRG intends to modify the terms of its secured credit agreement in a manner that will increase the restricted payments basket, increase the amount of permitted indebtedness, allow greater flexibility for the company to make capital investments, and reduce the existing cash sweep mechanism.
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"While the rating affirmation incorporates the increase in near-term cash flow and the reduction in cash flow volatility following the reset and extension of power and gas hedges, the negative outlook considers the $1.1 billion of permanent indebtedness added to the capital structure, at a time when share repurchases and future capital requirements have increased and are expected to stay at an elevated level,"
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