CenterPoint Energy 2009 Annual Report Download - page 78

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Our $1.2 billion credit facility backstops a $1.0 billion CenterPoint Energy commercial paper program under
which we began issuing commercial paper in June 2005. The $915 million CERC Corp. credit facility backstops a
$915 million commercial paper program under which CERC Corp. began issuing commercial paper in February
2008. The CenterPoint Energy commercial paper is rated "Not Prime" by Moody’s Investors Service, Inc.
(Moody’s), "A-3" by Standard & Poor’s Rating Services (S&P), a division of The McGraw-Hill Companies, and
"F3" by Fitch, Inc. (Fitch). The CERC Corp. commercial paper is rated "P-3" by Moody’s, "A-3" by S&P, and "F2"
by Fitch. As a result of the credit ratings on the two commercial paper programs, we do not expect to be able to rely
on the sale of commercial paper to fund all of our short-term borrowing requirements. We cannot assure you that
these ratings, or the credit ratings set forth below in "─ Impact on Liquidity of a Downgrade in Credit Ratings," will
remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn
entirely by a rating agency. We note that these credit ratings are not recommendations to buy, sell or hold our
securities and may be revised or withdrawn at any time by the rating agency. Each rating should be evaluated
independently of any other rating. Any future reduction or withdrawal of one or more of our credit ratings could
have a material adverse impact on our ability to obtain short- and long-term financing, the cost of such financings
and the execution of our commercial strategies.
Securities Registered with the SEC. In October 2008, CenterPoint Energy and CenterPoint Houston jointly
registered indeterminate principal amounts of CenterPoint Houston’s general mortgage bonds and CenterPoint
Energy’s senior debt securities and junior subordinated debt securities and an indeterminate number of CenterPoint
Energy’s shares of common stock, shares of preferred stock, as well as stock purchase contracts and equity units. In
addition, CERC Corp. has a shelf registration statement covering $500 million principal amount of senior debt
securities.
Temporary Investments. As of February 15, 2010, CenterPoint Houston had external temporary investments of
$450 million.
Money Pool. We have a money pool through which the holding company and participating subsidiaries can
borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based
on the net cash position. The net funding requirements of the money pool are expected to be met with borrowings
under our revolving credit facility or the sale of our commercial paper.
Impact on Liquidity of a Downgrade in Credit Ratings. As of February 15, 2010, Moody’s, S&P, and Fitch had
assigned the following credit ratings to senior debt of CenterPoint Energy and certain subsidiaries:
Mood
y
’s S&P Fitch
Com
p
an
y
/Instrument Ratin
g
Outlook(1) Ratin
g
Outlook(2) Ratin
g
Outlook(3)
CenterPoint Energy Senior Unsecured
Deb
t
.................................................. Ba1 Stable BBB-
N
egative BBB- Stable
CenterPoint Houston Senior Secured
Deb
t
................................................... Baa1 Positive BBB+
N
e
g
ative A- Stable
CERC Corp. Senior Unsecured Deb
t
.... Baa3 Stable BBB
N
egative BBB Stable
__________
(1) A Moody’s rating outlook is an opinion regarding the likely direction of a rating over the medium term.
(2) An S&P rating outlook assesses the potential direction of a long-term credit rating over the intermediate to
longer term.
(3) A "stable" outlook from Fitch encompasses a one- to two-year horizon as to the likely ratings direction.
A decline in credit ratings could increase borrowing costs under our $1.2 billion credit facility, CenterPoint
Houston’s $289 million credit facility and CERC Corp.’s $915 million credit facility. If our credit ratings or those of
CenterPoint Houston or CERC had been downgraded one notch by each of the three principal credit rating agencies
from the ratings that existed at December 31, 2009, the impact on the borrowing costs under our bank credit
facilities would have been immaterial. A decline in credit ratings would also increase the interest rate on long-term
debt to be issued in the capital markets and could negatively impact our ability to complete capital market
transactions.