All Annotations of Moody's changes NRG Energy's outlook to negative; affirms ratings[Preview]

saved byAt the Money on 2006-11-03

• 
  "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,"
• 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.
• 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.
• 
  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.