Moody's puts CenterPoint senior unsecured debt on review, rates loan Ba1

Moody's Investors Service put CenterPoint Energy's senior unsecured rating of Ba1 on review for possible downgrade and assigned a Ba1 rating to its new $2.35 billion secured bank credit facility due October 2006.

Moody's said the review on the senior unsecured rating primarily reflects the collateral and payment priority provided to lenders under the credit facility.

The review will focus primarily on subordination and payment priority issues between different classes of debt securities of CenterPoint. One aspect of this is the priority the bank credit facility receives as a result of the mandatory prepayment and commitment reduction provisions of the documentation, which includes application of 100% of the net cash proceeds of any sale of the stock in Texas Genco as well as 100% of the net cash proceeds from any securitizations relating to the recovery of stranded costs, after making any prepayments required under the $1.310 billion credit agreement of CenterPoint Energy Houston Electric, LLC.

Moody's confirmed CenterPoint Energy Houston's Baa2 senior secured ratings but revised the outlook to negative from stable.

The negative outlook reflects Moody's belief that there is some degree of uncertainty associated with the 2004 stranded cost true-up proceeding, with regard to the total amount of stranded cost recovery and the timing associated with that recovery. In addition, Moody's noted the priority of any net proceeds, after making any prepayments required under the $1.3 billion credit agreement, will be applied to the parent company's bank credit facility.

Moody's confirmed CenterPoint Energy Resources' Ba1 senior unsecured rating with a negative outlook.

S&P raises WCI Communities outlook

Standard & Poor's raised its outlook on WCI Communities Inc. to positive from stable and confirmed its ratings including its corporate credit at BB-. S&P assigned a B rating to its new $125 million senior subordinated notes due 2013.

S&P said the ratings are supported by WCI's shift toward broader, offerings, including more lower-priced units, which should provide better earnings stability. In addition, the company's ancillary businesses, amenities and real estate services also add diversity to the income stream.

The company has sufficient liquidity to meet its capital needs. It continues to retain cash flow to fund its growth, rather than paying out dividends to shareholders.

Furthermore, WCI's luxury tower business has regained some momentum after weakening in prior quarters and should be bolstered over the next few years by new projects, which have already seen very strong demand (via reservations) prior to construction.

A one-notch upgrade would likely result, should WCI meet its plan of achieving and sustaining 3.0x to 3.5x debt service coverage, while pursuing any expansion/acquisitions in a prudent manner, S&P said.

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