Fitch Ratings Upgrades Allegheny & Utility Subs; Placed On Rating Watch Evolving.Business Editors NEW YORK--(BUSINESS WIRE)--June 17, 2003 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has upgraded the senior unsecured ratings of Allegheny Energy Allegheny Energy (NYSE: AYE) is a traditional public utility based in the Pittsburgh suburb of Greensburg. It services communities in Western Pennsylvania, Western Maryland, Northern West Virginia, Northwest Virginia. Inc. (AYE) and its utility subsidiaries as follows: AYE to 'BB' from 'B+'; West Penn Power Company (WPP WPP Wire & Plastic Product PLC WPP World Press Photo WPP Web Presence Provider WPP Wolf Pack Productions (anime fan subbing group) WPP Witness Protection Program WPP Wireless Packet Platform WPP Work Package Planning ) to 'BBB-' from 'BB+', Potomac Edison Company (PE) to 'BBB-' from 'BB'; and Monongahela Power Company (MP) to 'BBB-' from 'BB'. Fitch has also assigned a 'BB' rating to AYE's $330 million unsecured bank facility maturing 2005. The ratings are also placed on Rating Watch Evolving. A list of the affected ratings is listed below. AYE's ratings are supported by stable dividend stream from its regulated subsidiaries MP, WPP and PE. AYE has low parent leverage and has suspended dividend payments to its common shareholders. As a result, AYE's standalone liquidity is adequately supported by dividend distributions received from its regulated subsidiaries. AYE's ratings also reflect the company's exposure to its unregulated subsidiary Allegheny Energy Supply Company LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (AE Supply, senior secured debt rated 'BB' by Fitch), which is currently facing financial stress. (For more details on Fitch's latest rating actions on AE Supply and affiliates, please refer to today's press release, 'Fitch Rates AE Supply Secured Bank Facilities; Affirms Senior At 'B'', available on the Fitch Ratings web site at 'www.fitchratings.com'.) The upgrade of AYE's senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. is triggered by a thorough analysis of the recovery prospects of the company based on the strong net equity value of its three regulated utilities. Fitch estimates that the net equity value of AYE's utilities covers AYE's current debt and potential exposure to AE Supply sufficiently. Currently AYE has issued about $200 million of guarantees on behalf of Allegheny. The upgrade of AYE permits the corresponding upgrade of its regulated utilities, whose ratings are currently constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by those of its parent. WPP, PE, and MP all have substantially better standalone credit profiles than indicated by their current constrained ratings. The rating constraint of the utilities by AYE's rating reflects the utilities' moderate degree of insulation from the parent. Since WPP, PE, and MP are not entirely insulated in·su·late tr.v. in·su·lat·ed, in·su·lat·ing, in·su·lates 1. To cause to be in a detached or isolated position. See Synonyms at isolate. 2. from the credit risk of their parent, their senior unsecured ratings are two notches above AYE's senior unsecured ratings. The Rating Watch Evolving status reflects the current status of AE Supply, whose ratings are contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the outcome of several upcoming events. The AYE group has yet to complete its restatements of quarterly financial results for 2002 and issue its 2002 financial statements, without which the AYE or AE Supply cannot access the public markets, sell certain assets, or obtain approval from the SEC to issue additional secured debts. Secondly, AE Supply is making progress towards monetizing its CDWR CDWR California Department of Water Resources Contract with the recent settlement with CDWR. While execution risk exists, the timely monetization of the CDWR Contract at a reasonable price would provide not only the proceeds to meet the 2003 amortization schedule but also free up cash used to post collaterals for hedges. Lastly, external funding by AYE or AE Supply before year end 2003, either in the public or private placement markets, will help to achieve liquidity at AE Supply. The ratings affected are listed below: Allegheny Energy, Inc. -- Senior unsecured debt upgraded to 'BB' from 'B+'; -- Bank credit facility maturing in 2005 rated 'BB'. West Penn Power Company -- Medium-term notes Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. upgraded to 'BBB-' from 'BB+'. Potomac Edison Company -- First mortgage bonds upgraded to 'BBB' from 'BBB-'; -- Senior unsecured notes upgraded to 'BBB-' from 'BB'. Monongahela Power Company -- First mortgage bonds upgraded to 'BBB' from 'BBB-'; -- Medium-term notes/pollution control revenue bonds (unsecured) upgraded to 'BBB-' from 'BB'; -- Preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. upgraded to 'BB+' from 'BB-'. Ratings of AYE's other affiliates are as follows: Allegheny Energy Supply Company LLC -- Secured bank credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities with first priority lien rated 'BB-'; -- Secured bank credit facilities with a second priority lien rated 'B+'; -- Unsecured bank credit facilities rated 'B'; -- Senior unsecured notes rated 'B'. Allegheny Generating Company -- Senior unsecured debentures rated 'B'. Allegheny Energy Statutory Trust 2001-A Notes -- Senior secured notes rated 'B+'. West Penn Funding LLC -- Transition bonds rated 'AAA'. Allegheny Energy Supply Company LLC -- Pollution control bonds (MBIA-Insured) rated 'AAA'. Allegheny Energy Inc. is a registered utility holding company, which owns three regulated utilities, Monongahela Power, Potomac Edison and West Penn Power and two non-utility subsidiaries. The utilities deliver electric and gas service to 1.5 million customers in parts of Maryland, Ohio, Pennsylvania, Virginia, and West Virginia West Virginia, E central state of the United States. It is bordered by Pennsylvania and Maryland (N), Virginia (E and S), and Kentucky and, across the Ohio R., Ohio (W). Facts and Figures Area, 24,181 sq mi (62,629 sq km). Pop. and 230,000 customers in West Virginia, respectively. AYE's non-utility subsidiaries consist of AE Supply Co. LLC, which develops, acquires, owns and operates generating plants and is a marketer of electricity and other energy products and Allegheny Ventures which is involved in telecommunications and energy related projects. |
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