S&P puts Vivendi Universal, Vivendi Universal Entertainment on positive watch

Standard & Poor's put Vivendi Universal SA and Vivendi Universal Entertainment LLLP on CreditWatch positive including Vivendi Universal SA's senior secured bank loan at BB and senior unsecured and subordinated debt at B+ and Vivendi Universal Entertainment's senior secured bank loan at BB+.

S&P said the action follows the announcement that Vivendi Universal had reached a preliminary agreement with General Electric Co. to merge its approximately 86%-owned subsidiary Vivendi Universal Entertainment with GE's fully owned media subsidiary NBC to form one of the largest media groups worldwide.

The CreditWatch placement primarily reflects the positive impact that the transaction would have on Vivendi Universal's debt protection measures and liquidity, S&P said.

If executed according to the terms announced yesterday, Vivendi Universal Entertainment and NBC will merge, forming a new GE subsidiary. Vivendi Universal Entertainment's shareholders will receive $3.8 billion in GE shares - which Vivendi Universal expects to monetize - and about $1.67 billion of Vivendi Universal Entertainment's debt will be transferred to the new entity.

The transaction would therefore result in a significant reduction of approximately $5 billion (€4.62 billion) in Vivendi Universal's consolidated net debt, which was estimated to be about €13.5 billion at the end of June 2003. At the same time, Vivendi Universal will retain a 20% stake in the newly formed subsidiary.

For Vivendi Universal, these benefits may well offset the effects of disposing of a relatively strong business like Vivendi Universal Entertainment, S&P said.

Nevertheless, S&P said it estimated that Vivendi Universal's credit metrics will remain relatively weak and that its reduced business scope and uncertainties over its future business strategy would likely limit any ratings upgrade to one notch.

S&P says Calpine unchanged

Standard & Poor's said Calpine Corp.'s ratings are unchanged including its corporate credit at B with a negative outlook following the sale of a 70% interest in its Auburndale power plant to a subsidiary of ArcLight Energy Partners Fund I LP for $86 million in cash.

S&P said the transaction will slightly strengthen liquidity at the expense of some long-term revenue stability. However, this is in keeping with Calpine's stated plan to sell some of its qualifying facilities to boost liquidity and is factored into the current ratings.

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