The ratings on French gas utility Gaz de France S.A. (GDF) remain on CreditWatch with negative implications, where they were placed on Feb. 27, 2006, following the announcement of a proposed all-share merger between GDF and Franco-Belgian multi-utility Suez S.A. (A-/Watch Pos/A-2). The negative CreditWatch placement reflects the dilutive impact the merger would have on GDF from a credit standpoint--in terms of both business and financial risk--given Suez's weaker business mix and financial profile. This is despite the fact that the merger would address GDF's strategic issues, especially those related to its plans to expand further abroad and in electricity. From a business risk perspective, although Suez is larger and more diversified than GDF, Standard&Poor's Ratings Services views
