Fitch Ratings cut the credit ratings of PSEG Energy Holdings to junk Monday because of the company’s weak earnings relative to debt, and the risks inherent in its portfolio of international and financial assets. Fitch cut PSEG Energy Holdings’ senior unsecured ratings to BB, the second highest junk rating, from BBB-minus, and kept a negative outlook on company.
PSEG Energy Holdings is a holding company for Public Service Enterprise Group’s high-growth, higher-risk unregulated businesses. The subsidiary, a smaller element than PSEG’s main utility and power segments, has significant investments in emerging markets, which have political and currency risk, Fitch said.
Its ratio of earnings before interest, taxes, depreciation and amortization to interest expense, a measure of cash earnings relative to debt servicing obligations, is 2.2 times, which is relatively weak for an investment grade company, Fitch said.
PSEG officials, in recent speeches, have said they have gotten the message that the riskier international business is not where their best interests lie. They have disposed of some assets and will be selling off others this year.
The parent company reported overall earnings from continuing operations for the year 2003 were a record $852 million or $3.72 per share of common stock, based on 229 million average shares outstanding.
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