(The following statement was released by the rating agency)

Dec 5 - Fitch Ratings has deemed the recently concluded exchange offer to

exchange a portion of the LBO notes and legacy notes at Energy Future Holdings

Corp (EFH) for new 11.25%/12.25% senior toggle notes due 2018 at Energy Future

Intermediate Holding Company LLC (EFIH) as a distressed debt exchange (DDE). As

a result, Fitch has lowered the Issuer Default Rating (IDR) of EFH to

'Restricted Default' (RD) from 'CC'. Fitch has also lowered the IDRs of EFIH,

Energy Future Competitive Holdings Company (EFCH) and Texas Competitive Electric

Holdings Company LLC (TCEH) to 'RD' from 'CC'. The rating for EFH's LBO notes, a

portion of which are subject to DDE, has been downgraded to 'CC/RR3' from

'CCC-/RR3'. The rating for EFH's legacy notes, which are also subject to DDE, is

unchanged at 'C/RR6'.

On Dec. 5, 2012, EFIH announced that it will be issuing $1.145 billion of new

11.25%/12.25% senior toggle notes due 2018 in exchange for $1.6 billion of EFH's

debt as follows:

--$234 million of 5.55% series P senior notes due 2014;

--$510 million of 6.50% series Q senior notes due 2024;

--$453 million of 6.55% series R senior notes due 2034;

--$94 million of 10.875% senior notes due 2017;

--$313 million of 11.25%/12.00% senior toggle notes due 2017.

Fitch has deemed the debt exchange as DDE given the material reduction (an

average of 71%) in the principal amount for the exchanges notes and change from

a cash pay basis to pay-in-kind (PIK). The new notes carry a three-year PIK

feature.. The material reduction in terms for the exchanged notes is only

partially offset by increase in interest rates on the new notes and a higher

seniority in the capital structure for the legacy notes.

Since the exchange offer has been completed under a privately negotiated

transaction with investors, Fitch has simultaneously taken various rating

actions based on the post-exchange capital structure and the fundamental outlook

for each of the entities. Fitch has upgraded the IDRs of EFH and EFIH to 'CCC'

from 'RD'. Fitch has also upgraded the IDRs of TCEH and EFCH to 'C' from 'RD'.

Fitch has upgraded the ratings of EFH's LBO notes to 'CCC+/RR3' and EFH's legacy

notes to 'CC/RR6'. Fitch has also assigned a 'CCC+/RR3' rating to the new notes

issued by EFIH pursuant to the exchange offer, which rank pari passu to EFH's

LBO notes. The ratings for Oncor Electric Delivery Company LLC (Oncor) are

unaffected by today's rating actions.

Fitch has delinked the ratings of TCEH and EFH/EFIH based on the expectation

that EFH will either make EFCH an unrestricted subsidiary or remove the

cross-default language from the LBO notes' indenture in the near future,

thereby, insulating EFH/EFIH's credit profile from any potential restructuring

at TCEH. The repayment of the inter-company loans (ICL) to TCEH year-to-date,

including the commitment to repay $680 million of remaining ICLs in January

2013, reduces the financial ties between the two entities significantly. Fitch

considers it highly unlikely that EFH will provide any significant financial

support to TCEH going forward. The just concluded exchange offer is further

viewed by Fitch as a step to affect liability management at EFH/EFIH as a

stand-alone entity. As a result, Fitch believes that the degree of linkage

between EFH and TCEH is significantly weaker than before and the IDRs are,

therefore, being based on the respective stand-alone credit profiles of the two

entities.

The 'CCC' IDRs for EFH and EFIH reflect the highly leveraged capital structure,

sufficient but declining liquidity, and currently constrained, but growing

distributions and tax payments from Oncor. Fitch expects dividend distributions

and corporate tax payments as the only principal source of cash flows for

EFH/EFIH going forward. Fitch expects EFH/EFIH's FFO to consolidated debt to be

in a 6%-7% range and FFO to interest ratio to be 1.7x-1.8x over 2013-2018, which

is indicative of a 'CCC' IDR. Fitch's financial forecasts assume no tax

implications for EFH due to any potential restructuring activities at TCEH.

The just concluded exchange offer is marginally positive for EFH/EFIH's credit

profile given the $450 million debt reduction and $360 million interest expense

savings over three years (due to the PIK feature) that benefits near-term

liquidity. Combined liquidity at EFH/EFIH has been bolstered by $2.25 billion of

first and second lien debt issuances year-to-date, of which a significant

portion has been utilized or committed to repay the ICLs to TCEH that stood at

$1.6 billion at the end of 2011. The repayment of the demand note does not alter

the overall leverage at EFIH, since the inter-company notes were guaranteed by

EFIH on a senior unsecured basis, but the interest cost to EFIH did increase

materially as a result of the issuances.

Combined liquidity at EFH/EFIH stood at $1.48 billion as of Sept. 30, 2012,

which does not reflect the $253 million first lien issuance in October and

includes the $680 million held in escrow to repay the remaining ICLs to TCEH.

Looking forward, Fitch expects combined liquidity to be affected by reduced

upstream dividend and cash tax payments from Oncor during 2012-2013 and higher

interest expense associated with the new debt issued by EFIH year-to-date,

partially offset by interest cost savings from the recently concluded exchange

offer. Fitch expects liquidity to be adequate until 2016 given EFIH has capacity

to issue an incremental $250 million in second lien debt based on current debt

incurrence restrictions. Further liability management, refinancing of the

current high cost debt, and/ or equity infusion will be needed to right size the

capital structure and support liquidity at EFH/EFIH, in Fitch's view.

The 'C' IDR for TCEH reflects Fitch's view that the current highly leveraged

capital structure is not sustainable. Despite the upward movement in the

shorter-term natural gas prices and declining reserve margins in Texas, Fitch

believes it highly unlikely that power prices will recover to levels required

for TCEH to reach cash breakeven. TCEH's generation output continues to suffer

from partial economic back-down as natural gas power plants displace coal units

during certain off-peak periods. While TXU Energy has been able to somewhat stem

customer defections and sustain attractive margins year-to-date due to falling

wholesale prices, intensified competition and significant headroom between TXU

Energy's and competitive offers are likely to put pressure on both margins and

customer retention.

Liquidity at TCEH stood at $2.3 billion as of Sept. 30, 2012, which consists of

$309 million of cash and cash equivalents, $1.77 billion availability under its

revolving facility and $265 million availability under its letter of credit

facility. The cash balances as of Sept. 30, 2012 do not include the $680 million

held in escrow to settle demand notes payable by EFH but include $750 million in

cash collateral received from counterparties for commodity hedging and trading

transactions. Fitch forecasts the free cash flow deficit in 2013 to

significantly deplete TCEH's current available liquidity and with the expiration

of $645 million unextended portion of the revolving credit facility in October

2013, liquidity runs out in late 2013/early 2014 timeframe.

TCEH's near-term debt maturities are significant including the $3,851 million

unextended portion of term loans and deposit letter of credit (LOC) loans in

October 2014 and the $4,875 million of cash pay/PIK toggle notes in 2015/2016

(which excludes approximately $363 million of notes held by EFH and EFIH). The

debt maturity schedule could be exacerbated by the springing maturity provision

for the extended portions of the term loans and deposit LOC loans if the

requisite conditions are not met. Fitch

COPYRIGHT

Copyright Thomson Reuters 2012. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.