PrefBlog

TransCanada issued a press release yesterday:

its subsidiary has agreed to acquire from National Grid plc (National Grid), all the outstanding membership interests of KeySpan-Ravenswood, LLC, that directly or indirectly owns or controls the 2,480 megawatt (MW) Ravenswood Generating Facility (Ravenswood) located in Queens, New York for US$2.8 billion plus closing adjustments.
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The acquisition will be financed in a manner consistent with TransCanada’s current capital structure and commitment to maintaining its ‘A’ credit rating.

Today, DBRS announced:

DBRS has today placed the Unsecured Debentures & Notes, Preferred Shares – cumulative and Junior Subordinated Notes ratings of TransCanada PipeLines Limited (TCPL or the Company) Under Review with Developing Implications.
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The Company’s financial risk will initially rise based on the interim debt financing of the transaction, which will create execution risk, pending permanent financing expected by DBRS to occur within several months after transaction closing. On a fully debt-funded basis, DBRS estimates pro forma debt to capital of approximately 64% and cash flow to debt of 0.15 times based on the December 31, 2007 operating results (60% and 0.17 times respectively). However, TCPL intends to fund the acquisition with components of incremental debt and equity in line with its current capital structure in order to maintain appropriate credit metrics consistent with its current credit ratings.

These two issues were recently highlighted on PrefBlog with the note:

There were some credit worries when they made a big investment in Dec 06, but these were taken care of by an equity issue.

S&P now has these issues at P-2 [Watch Negative], with the comment:

Standard & Poor’s Ratings Services today said it placed its ratings, including its ‘A-‘ long-term corporate credit rating, on TransCanada PipeLines Ltd. on CreditWatch with negative implications.
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“Nevertheless, the facility’s returns will likely be more variable and less certain than those of TransCanada’s core pipeline business,” said Standard & Poor’s credit analyst Kenton Freitag. We expect the company to finance the transaction with a significant equity component so as to maintain its credit measures.
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We expect that the review will be completed by mid-May. Changes to the ratings, if any, would be limited to one notch.

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