The Texas state Supreme Court ruled last Wednesday in favor of two issuers' planned stranded cost securitizations, clearing the path for approximately $2.097 billion of rate reduction bonds to eventually be sold.

The larger of the pending offerings, $1.3 billion from TXU Transition Bond Co LLC, a vehicle of TXU Corp., is now scheduled to price in the fourth quarter 2001. Also, the court upheld the proposed offering of a $797 million deal from Central P&L.

The TXU offering had been held up due to the disputed value of the company's stranded costs as well as its planned amortization schedule. The Texas state Public Utility Commission (PUC) had authorized TXU to securitize only $363 million in the ABS market.

"This is a favorable ruling from the perspective of both TXU and its customers. The ruling stated that the securitization process outlined by TXU would benefit all consumers," said Tom Baker, president of TXU Electric. "TXU is now prepared to move quickly through the process to take full advantage of the low interest rates in the market, which provides even more benefits"

The offering, initially scheduled for early 2000, is now expected sometime in the fourth quarter, a company source said.

As for CP&L, a unit of American Electric Power Co. (AEP), in addition to a dispute over how much the company could securitize, the Texas Supreme Court unanimously upheld the constitutionality of the concept of recouping stranded costs through securitization.

Following the decision, CP&L, which had been behind TXU's schedule, "plans to move forward as quickly as we can," said Larry Jones, manager of public affairs for AEP. "Any timing for this offering though is too soon to project at this point."

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