Moody's cuts Semco view to negative

Moody's Investors Service said it affirmed the credit ratings of Semco Energy Inc. and its supported debt (Ba2 senior unsecured) and changed the outlook to negative from stable.

These rating actions follow Semco's announcement that it will take out the preference stake held by K-1 Ventures Ltd., a private equity firm and the company's largest shareholder, with a new preferred stock issuance.

This transaction was prompted by recent unfavorable regulatory developments and was not known to Moody's at the time Moody's stabilized Semco's outlook in January 2005.

Moody's said this refinancing will result in weaker credit metrics and covenant cushions than Moody's had expected previously. Furthermore, according to the company's latest forecast, it appears less likely that Semco will sustain positive post-capex free cash flow over the near term as previously expected.

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