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RESTRUCTURED TUCSON ELECTRIC SENIOR DEBT TO BE RAISED TO 'BIB-' BY FITCH -- FITCH FINANCIAL WIRE --

RESTRUCTURED TUCSON ELECTRIC SENIOR DEBT TO BE RAISED TO 'BIB-' BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Nov. 10 /PRNewswire/ -- Tucson Electric Power Co.'s first mortgage bonds will be removed from FitchAlert and raised to 'BB-' from 'CCC' if the company's proposed restructuring of its capital structure, expected by year end, is successful. Any further rating improvement will depend on the outcome of the next rate order from the Arizona Corporation Commission. The company, while still rated below investment grade, will have adequate coverages to meet its debt and lease obligations after the restructuring. The credit trend will be improving.
 The proposed restructuring plan comes after a long debt moratorium (from Jan. 31, 1991, to present) and is an attempt to avoid filing for Chapter 11 bankruptcy. The plan's objective is to realign TEP's financial and operating obligations to more fully match its revenues and cash flow. While this balance sheet restructuring will help Tucson Electric's finances, the company's health will depend on retail rate increases, full recovery of Springerville Unit 2 costs not presently in rate base, reduced leverage and lower interest costs, and successful liquidation of non-utility investment subsidiaries.
 A successful restructuring would provide Tucson Electric more flexibility with creditor banks by loan consolidation and extending maturities, reduce the price of Springerville Unit 1 power by eliminating the related power purchase contract and allowing the company to become direct lessee and operator of the unit, decrease the cost of long-term fuel commitments, and ultimately improve financial leverage. Following the restructuring, equity will still be negative. On a pro forma basis as of June 30, 1992, the deficit will be reduced to about $20 million from $270 million.
 Common and preferred stockholders will be asked to vote on the proposed restructuring at a special meeting on November 17. The restructuring is one of many steps required to keep this utility in a sound financial condition,including rate relief in 1993.
 Tucson Electric's creditors -- the credit banks and the debt and owner participants in the Springerville Unit 1 leases -- will receive 50 percent of the restructured utility's common stock in return for the restructured agreements including the waiver of certain payment obligations. In addition, owner participants in Springerville Unit 1 leases will receive warrants. TEP's articles of incorporation will be amended to reclassify all outstanding preferred stock into about 34 percent of the common stock. Preferred dividend arrears will not be paid. Common stockholders would see their interest reduced to about 16 percent of total equity.
 If shareholder approval is not obtained, the likelihood of bankruptcy would increase substantially.
 -0- 11/10/92
 /CONTACT: Anne F. Faber of Fitch, 212-908-0566/
 (TEP) CO: Tucson Electric Power Co. ST: Arizona IN: UTI SU: RTG


LD -- NY097 -- 9435 11/10/92 16:25 EST
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Publication:PR Newswire
Date:Nov 10, 1992
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