Allegheny firms up refinancing

March 09, 2004|by BRIAN SHAPPELL

HAGERSTOWN - A finalized Allegheny Energy Inc. refinancing plan, the company's top priority this year, was announced Monday, according to a company spokeswoman and a prepared news release.

The deal, which includes acquiring $1.55 billion dollars in new debt to replace old borrowings, helped the company to reduced its debt by about $175 million and provided some much needed financial stability, the company said.

Janice Lantz, a spokeswoman for Allegheny Energy, said the company used proceeds to refinance existing bank debt the company had until April 2005 to pay and used other cash to reduce other outstanding debts by about $175 million.


Lantz said the refinancing, made possible by new loans and new credit facilities, has Allegheny Energy pointed in the right direction for the future.

"It's going to be substantial interest savings," Lantz said. "We got a much better rate on this new money."

In a news release issued Monday evening, Allegheny Chairman and Chief Executive Officer Paul J. Evanson said the debt refinancing was the company's most important goal for 2004.

"The new loans and credit facility and the reduction in the level of our debt outstanding will reduce our interest payments by more than $60 million annually, extend maturities and significantly improve financial flexibility," he said. "We can now focus on other initiatives, especially further reducing leverage and building a high-performance organization."

The release stated the new debt will be structured as follows:

  • Allegheny Energy receives a $200 million unsecured revolving credit facility and a $100 million unsecured term loan.

    The lead lenders in those include Citigroup Global Markets Inc. and Scotia Capital (USA) Inc. Allegheny Energy has three years to pay off that debt.

  • Allegheny Energy Supply Co. LLC., its energy trading subsidiary, receives a $750 million secured term loan that must be repaid in seven years. Lead lenders include Citigroup Global Markets and J.P. Morgan Securities Inc. The company also receives a $500 million secured term loan that must be repaid in seven and one-quarter years. Lead lenders included Citigroup Global Markets and Banc of America Securities, LLC.

Lantz was unable to immediately provide information Monday on what the company plans to do with its newly acquired "financial flexibility."

Monday's announcement came just more than one month after a Feb. 4, announcement by Allegheny that it received permission from the U.S. Securities and Exchange Commission to issue up to $1.6 billion of indebtedness to refinance its existing debt.

Less than two weeks later, Standard & Poor's announced the company was close to completing the refinancing deal. Tobias Hsieh, director of S&P's Utility, Energy and Project Finance Group in New York City, said the deal was an important milestone and prompted S&P to issue a stable outlook for the utilities credit rating.

About four years ago, Allegheny began to experience financial troubles following the company's purchase of power plants outside its traditional service area and the Merrill Lynch energy trading unit. Energy analysts said the move represented Allegheny's attempt to become a player in the national energy trading market.

However, the company accrued a large amount debt as a result.

In 2002, the company's management team reduced the work force by more than 600 workers.

In 2003, the company announced a $2.4 billion financing deal helped the company avoid filing for bankruptcy. Also last year, the company replaced much of its management team.

Allegheny Energy is an integrated energy company with a portfolio of businesses, including Allegheny Energy Supply, which owns and operates electric generating facilities, and Allegheny Power, which delivers electric and natural gas service to about 4 million people in Pennsylvania, West Virginia, Maryland, Virginia and Ohio.

About 45,000 customers in Washington County receive services through Allegheny Energy, Lantz said.

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