S&P: Entergy on developing watch

Standard & Poor's said it placed all of its ratings on Entergy Corp., including its BBB issuer credit rating, on CreditWatch with developing implications.

The agency said that the rating action follows the company's announcement that it plans to recapitalize its merchant nuclear generation assets through the issuance of about $4.5 billion of debt and spin off the assets through a tax-free transaction.

S&P noted that the CreditWatch listing reflects the potential for higher or lower ratings on Entergy depending on the amount and use of any proceeds from the proposed spin-off and uncertainty regarding Entergy's financial risk profile and debt leverage post transaction.

Contingent upon the successful spin-off, expected by the third quarter of 2008, S&P said it may view the newly created merchant generation company as a standalone entity with no relationship to Entergy, other than the proposed jointly-owned services company that will operate the assets.

However, should S&P determine that parent company Entergy continues to have a meaningful relationship with the newly recapitalized merchant nuclear generation company, then the ratings on Entergy and its utility affiliates will be adversely affected.

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