Allegheny Energy Supply is attempting to recast a $1.075 billion term loan "B" obtained last year, according to Power, Finance & Risk, an LMW sister publication. The term loan is priced at LIBOR plus 2 1/2% and Allegheny is looking to save some $25 million annually by landing a 50 basis point reduction, said Jeff Serkes, cfo at parent Allegheny Energy in Greensburg, Pa.
Suzanne Lewis, treasurer, said attractive market conditions including a more favorable interest-rate environment than last year made reworking the debt now a more tenable option. The Citigroup-led loan, which will mature in March 2011, includes a pricing grid allowing it to shave off an additional 25 basis points if its parent's rating improves. It is rated Ba1 by Moody's Investors Service and BB- by Standard & Poor's.
The loan will refinance the $744 million outstanding in its current term loan and a portion of $331 million in 10 1/4% notes due November 2007. The balance of the notes will be paid down using a combination of cash on hand and Allegheny Energy's $400 million credit facility. In a separate transaction, Lewis said the company will also redeem $35 million in 13% senior notes.
The new loan is being pitched to institutional investors and some relationship banks, said one banker. Credit Suisse First Boston and Bank of America are joint bookrunners. A B of A banker declined comment while CSFB officials did not return calls. Commerzbank and Bayerische Landesbank have been approached but lenders at both banks declined to comment.
Last month the utility holding company wrapped a $400 million revolver and a $300 million term loan at LIBOR plus 2%, saving the company $8 million in interest expense. The debt has a similar structure, which allows the company to drop 25 basis points if its credit rating is raised.
