Standard & Poor’s Ratings Services (S&P) said Tuesday that it affirmed its ‘BBB’ corporate credit ratings on holding company NiSource Inc. and its subsidiaries and upgraded its outlook from ‘Negative’ to ‘Stable.’

The action includes NiSource’s Northern Indiana Public Service Co. (NIPSCO), Columbia Energy Group (CEG), Bay State Gas Co., NiSource Capital Markets Inc. and NiSource Finance Corp. subsidiaries. S&P noted that the Merrillville, IN-based company had approximately $6.57 billion of total debt outstanding as of March 31, 2003.

“The outlook revision results from meaningful actions that NiSource has taken to strengthen its aggressively leveraged balance sheet and improve its overall financial profile, as well as continued expectations for additional near-term credit enhancing initiatives,” said S&P credit analyst Barbara A. Eiseman. “Notably, the company has divested virtually all of its higher-risk, non-core assets, resulting in more than 98% of operating income and cash flow being derived from regulated activities.

“Net proceeds from the asset sales, in conjunction with the highly successful common equity offering of $736 million in late 2002, has enabled NiSource to reduce its onerous debt burden by nearly $1.4 billion over the past 18 months,” she added.

S&P noted that the stable outlook on the companies reflects the expectation of sustained financial improvement and actions taken to date to deleverage, as well as the company’s “geographic diversity and significant scale, modestly growing service areas, favorable regulatory climate, and a competitive gas distribution and transmission cost structure.”

The credit rating agency said upside credit potential will be limited by high debt leverage and NIPSCO’s heavy dependence on the industrial sector.

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