Allegheny Energy Supply Co. has completed a new $1.075 billion term loan "C" and despite a skinny spread of LIBOR plus 1 3/4%, the deal broke for trading at 100 7/8-101 1/4. An Allegheny spokesman was unable to comment on whether the deal has been completed, but noted the new loan will reduce interest expense by refinancing Allegheny's existing term loan. This had $744 million outstanding and was priced at LIBOR plus 2%. The new "C" also refinances approximately $331 million of 10 1/4% senior notes due 2007 and $35 million of 13% senior notes.
Citigroup Global Markets is lead arranger and Banc of America Securities and Credit Suisse First Boston are joint bookrunners on the loan.
The demand for the name is in contrast to a few years ago when the company unsuccessfully expanded into trading activities by purchasing Merrill Lynch's Global Energy Markets unit. Now the company has sold most of its trading portfolio and is pushing for investment-grade status. The spokesman noted that management intends to pay down $1.5 billion of debt between December 2003 and the end of this year. "Getting to investment grade helps us to borrow money at the right price," he said. Among the initiatives targeted is investment in new emission controls.
"Allegheny Energy has gone through trial and tribulations," said one trader that is active in the name. He noted that since bringing in new management from Florida Power Corp., including Joseph Richardson as ceo, the company has been delivering and is moving back towards an investment-grade asset. The debt is currently rated BB by Standard & Poor's.