TEXT-Moody's release on MXEnergy Holdings Inc

(The following statement was released by the ratings agency)

May 19 - Standard & Poor's Ratings Services today revised its outlook on MXEnergy Holdings Inc to negative from stable, and affirmed the company's 'B' corporate credit rating. The revision follows the publication of the company's third-quarter results, which exhibited a significant decline in adjusted EBITDA. The decline resulted from lower natural gas profits, reduced volumes, and higher operating costs. As a result, key credit metrics have declined considerably, with debt to EBITDA slightly above 4x as of March 31, 2008. The company also amended its debt covenants, including raising the average debt to EBITDA ratio to 5x from 4x and reducing the minimum interest coverage ratio to 1.4x from 1.6x, which are now less supportive of bondholder protection. Liquidity could be strained by rising gas prices, which will reduce availability under its revolving credit facility. The credit facility matures in December 2008, and will need to be extended or replaced for ongoing liquidity needs. As of March 31, 2008, MXEnergy had $162 million of debt.

"The 'B' corporate credit rating on MXEnergy reflects its vulnerable business risk profile and highly leveraged financial profile," noted Standard & Poor's credit analyst William Ferara. "Credit risks include management's acquisitive nature, a highly leveraged capital structure, the lack of significant barriers to entry or any major competitive advantages in the retail marketing segment, relatively flat participation in retail choice programs across the country, and newly implemented internal controls and procedures," he continued.

The outlook on MXEnergy is negative. The outlook reflects weakened credit metrics resulting from a significant decline in adjusted EBITDA due to reduced gas margins and higher operating costs. It also reflects the company's liquidity position which is under pressure from rising gas prices. We could lower the rating if adjusted EBITDA is below our expectations. We could also lower the rating if the company makes additional debt-funded acquisitions or market conditions deteriorate. We could revise the outlook to stable if financial metrics and liquidity improve to levels appropriate for the rating. (New York Ratings Team)