Moody's cuts PNM Resources to junk

Moody's Investors Service said it downgraded PNM Resources, Inc.'s senior unsecured bank credit facility and senior unsecured convertible bonds to Ba2 from Baa3 and its commercial paper to Not Prime from Prime-3.

The agency also downgraded subsidiary Public Service Co. of New Mexico's issuer rating, senior unsecured bank credit facility and senior unsecured bonds to Baa3 from Baa2, its preferred stock to Ba2 from Ba1 and its commercial paper to Prime-3 from Prime-2.

The ratings remain on review for possible downgrade, where they were initially placed in January.

The downgrade follows a decision by the New Mexico Public Regulation Commission to authorize a $35 million, or 6%, increase in Public Service Co. of New Mexico's base electric retail rates. The agency explained that the authorized increase is less than half of the base rate increase requested by the company and less than 25% of the company's estimated total requested increase including the impact of a fuel adjustment clause.

The weakened financial profile of PNM Resources is primarily a result of poor performance at the subsidiary, Moody's said, but the parent company has also been negatively impacted by an increased debt burden relating to its acquisitions of TNP Enterprises in 2005 and the Twin Oaks generation facility in 2006.

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