Takeover Bid Ruffles NorthWestern's Rating Outlook

The positive rating outlook for NorthWestern Corp. following its recent closing of a $200 million senior unsecured credit facility has been muddied by an unsolicited takeover bid.

  • 29 Jul 2005
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The positive rating outlook for NorthWestern Corp. following its recent closing of a $200 million senior unsecured credit facility has been muddied by an unsolicited takeover bid. Montana Public Power, a non-profit grouping of five Montana cities, has delivered an unsolicited offer to buy 100% of NorthWestern's stock for $1.18 billion as well as the assumption of its debt. "As of July 1, Standard & Poor's has rated us as BB and downgraded our company outlook to negative due to the June 30 offer from Montana to buy us out," said Brian Bird, cfo in Sioux Falls, S.D., who says NorthWestern is strongly opposed to any buyout by MPP.

The rational behind the outlook change revolves around a lack of information on MPP, as well as the fact the deal would raise NorthWestern's debt to about $2 billion from its current level of $755 million. The bid has been rejected by NorthWestern, with the company citing inadequate pricing and high levels of risk as the primary reasons. Even if a deal was to be completed, there are substantial doubts that it would ever close. Once the deal is either dead or consummated, S&P is expected to re-evaluate NorthWestern's rating.

Prior to the Montana offer, Northwestern's senior secured ratings had been increased to BB+ by S&P, and BBB by Fitch Ratings. Moody's Investors Services revised its outlook to positive, after the company landed a $200 million senior unsecured credit facility. The company's senior unsecured rating was raised by all three institutions. Fitch rates it at BB+, Moody's at Ba2 and S&P had placed its rating at B+. Additionally, S&P bestowed Northwestern with a corporate rating of BB flat. "This new [loan] facility will act as a catalyst to improve our credit profile as well as to help us lessen our outstanding secured debt," said Bird.

With many of its competitors in the utilities industry at investment grade, NorthWestern feels it is important to have the same financial strength.

  • 29 Jul 2005

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