S&P cuts NUI Utilities ratings to junk

Standard & Poor's said it lowered its corporate credit rating and senior unsecured debt rating on NUI Utilities Inc. to BB from BBB-.

The rating on NUI Utilities remains on CreditWatch with developing implications as the parent NUI Corp. is being actively marketed for sale.

S&P said the rating action reflects S&P's assessment of the business and financial challenges the firm faces. Notably, an already weakened financial profile for the consolidated company is further burdened by an investigation of energy trading transactions by affiliate NUI Energy Brokers as well the potential for greater regulatory scrutiny in New Jersey, which could ultimately impact the sale of parent NUI Corp.

Combined with parent NUI's weakened financial state, the investigation of energy trading transactions could complicate the proposed sale of the company.

S&P said the BB rating on NUI Utilities more accurately reflects the firm's risk exposure to regulatory uncertainty and the parent's financial weakness.

Importantly, NUI Corp. has addressed anticipated liquidity needs in the interim period before a sale can be consummated with a $405 million 364-day financing package, which can be extended for another 364 days at the company's option, expected to be finalized shortly. This addresses NUI's credit facilities expiring in February 2004 and debt maturities, which total $240 million.

S&P said it estimates that about $180 million of the existing facilities has been used and $50 million remains undrawn. Unexpected delays in the resolution of the sale could impair the company's liquidity position.

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