S&P Rates Arizona Pblc Service's Shelf Filing, Bnk Lns.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 9/11/98-- Standard & Poor's today assigned its preliminary 'A-'/'A-'/'BBB' ratings to Arizona Public Service Arizona Public Service Company is the largest electric utility in Arizona and the principal subsidiary of publicly-traded S&P 500 member Pinnacle West Capital Corporation (NYSE: PNW), which in turn had been formerly named AZP Group Co.'s $350 million first mortgage bonds, senior notes, and debt securities Rule 415 shelf filing. In addition, Standard & Poor's assigned its triple-'B' bank loan rating to Arizona Public Service's unsecured $250 million 5-year credit agreement due June 18, 2003 and $150 million 364-day credit agreement due June 16, 1999. Arizona Public Service's corporate credit rating is BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +/Stable/A-2. The preliminary shelf ratings on the first mortgage bonds and senior notes are one notch notch (noch) incisure; an indentation on the edge of a bone or other organ. aortic notch dicrotic n. cardiac notch 1. higher than the corporate credit rating as a result of Standard & Poor's ultimate recovery analysis, which projects substantial overcollaterallization of the maximum amount of secured debt allowed under the terms of the mortgage indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. . However, the senior notes will become unsecured obligations upon the release date, which means the date that the company has repaid all of its outstanding first mortgage bonds excluding the senior notes. Based on the utility's outstanding first mortgage bonds maturity schedule, the release date is not expected to occur until 2028. However, the company has the option to call its first mortgage bonds in March 2004. The utility's senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. and bank loan ratings are rated one notch below the corporate credit rating, reflecting the presence of secured bondholders, which disadvantages the unsecured bondholders. Ratings for Arizona Public Service, a unit of Pinnacle pinnacle (pĭn`ĭkəl), minor architectural motif of vertical tapering shape, usually crowning a pier, buttress, or gable. Although sometimes it appears in Renaissance design, as in the Certosa di Pavia, it is almost exclusively a medieval West Capital Corp., reflect the utility's average business profile combined with an improving financial profile. The business profile reflects a vibrant service area, adequate and diverse fuel supply, and modest industrial concentration. These strengths are tempered by nuclear asset concentration, a historically difficult regulatory environment, and lack of a fuel clause. Management continues to focus on cost-containment efforts due to the 1996 rate agreement, which provides for a sharing of cost savings between the customers (55%) and shareholders (45%) through July 2, 1999. Thus far, the utility's competitive position has benefited from rate reductions that lowered rates by an aggregate of 5.74% under the 1996 agreement. Nevertheless, the utility is in the midst Adv. 1. in the midst - the middle or central part or point; "in the midst of the forest"; "could he walk out in the midst of his piece?" midmost of stranded cost proceedings to recover about $533 million of above-market generation costs. Operations at the Palo Verde Nuclear Station continue to excel despite the ongoing cost-containment efforts. This is highlighted by Palo Verde's three-year average capacity factor of 87.7%. With no major capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. expected and the accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. of regulatory assets totaling $120 million annually through July 2004, cash flow after dividends should easily cover outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. . Cash flow interest coverage and cash flow to average total debt (adjusted for off-balance-sheet liabilities, principally the Palo Verde sale-leaseback) should approach 4 times and exceed 25% over the forecast period, Standard & Poor's said. --CreditWire OUTLOOK: STABLE The stable outlook reflects a moderately improving financial profile through cost reduction, robust growth, and solid operating performance at the Palo Verde nuclear station. Although stranded cost recovery will be a challenge, reasonable and supportive regulatory treatment is expected. -0- Credit Profile ISSUER CREDIT RATING Arizona Public Service Co. Corp credit rtg BBB/Stable/A-2 NEW RATINGS First mtg bnds AA- Sr nts AA- Debt secs BBB Bank ln rtg BBB CONTACT: Raymond M Leung, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1621 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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