Moody's cuts Energy Future, rates Texas Competitive notes Caa3

Moody's Investors Service said it downgraded the corporate family rating for Energy Future Holdings Corp. to Caa2 from Caa1 and probability of default rating to Caa3 from Caa2.

The agency also said it affirmed its SGL-4 speculative grade liquidity assessment, along with its senior secured 9¾% and 10% securities due 2019 and 2020 at Caa3 (LGD 5, 62%), legacy senior unsecured notes due 2014, 2024 and 2034 at Ca (LGD 5, 85%) and senior secured notes due 2019 and 2020 at Caa3 (LGD 5, 62%).

The agency also said it downgraded the company's LBO senior unsecured guaranteed 10.875% cash pay notes and 11¼% to 12% payment-in-kind toggle notes, both due 2017, to Ca from Caa3 (LGD 5, 81%), along with its unsecured notes to Ca from Caa3 (LGD 5, 69%).

The agency also said it assigned a Caa3 (LGD 3, 41%) to Texas Competitive Electric Holdings Co. LLC's second-lien notes due 2021, and downgraded its senior secured first lien notes to B2 from B1 (LGD 2, 15%), LBO 10¼% cash pay and 10½ % to 11¼% payment-in-kind toggle senior unsecured guaranteed notes due 2015 and 2016, respectively, to Caa3 from Caa2 (LGD 4, 52%) and legacy senior unsecured notes to Ca from Caa3 (LGD 4, 65%).

The outlook remains negative.

The downgrade is triggered by the persistent environment of low natural gas and power commodity prices and low average heat rates, which collectively drag down its current and expected cash flow generation, Moody's said.

There is little evidence indicating a significant improvement to natural gas commodity prices, the agency said, so the company is likely to remain in financial distress.

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