Allegheny Energy very active after company discloses plans to refinance bank debt

By Carlise Newman

Chicago, Sept. 26 - Allegheny Energy Inc. was the main focus in an otherwise mute bank loan trading session Friday, after the ailing energy company said in a conference call it would refinance $1.45 billion in bank debt.

Allegheny Energy Inc. said in a call to discuss its 2002 earnings that it will not have enough cash to pay $350 million in bank debt due next year and that it would refinance $1.45 billion in bank debt due in 2004 and 2005 (see story elsewhere in this issue).

Allegheny's second-lien term loan was quoted at 96¾ bid, 97¾ offered, which one trader said was a "significant drop," although he did not have prior levels.

"That was the main thing everyone did today. Otherwise it was pretty dry," he said.

The company filed its 2002 annual report on Thursday after a delay due to an accounting probe and says it anticipates filing its delayed quarterly results for 2003 by the end of the year.

"Everyone was on Allegheny after the conference call. We knew it would be like this today after they filed their monster 600-page 10-K last night. People are still going through it," one trader said.

Allegheny, which has yet to report any quarterly financials for 2003, said it will be able to raise funds in the public debt and equity markets once it is up-to-date with its financial filings.

Included in the report was a "going concern" qualification from the company's auditors. Allegheny explained that that was because its reporting is not current, which means it is not in compliance with reporting covenants for some of its debt securities. The noncompliance caused $3.7 billion of long-term debt to be reclassified as short-term debt on the balance sheet, resulting in the auditors' qualification.

Through Dec. 31, Allegheny is required to make payments including $265 million of scheduled payments under bank credit facilities; $47 million of other maturing and amortizing debt, which excludes $37 million of securitization debt that will be repaid from a dedicated revenue stream; and $25 million in payments scheduled to be made to trading counterparties through the end of 2003.

Elsewhere Eastman Kodak Inc. was still active on recent downgrades by rating agencies. The 364-day revolver was seen at 95¾ bid, 97¼ offered, a drop of ¼ point, a trader said.

The company announced on Thursday morning that in order to maintain financial flexibility it was reducing its dividend to a semi-annual rate of 25 cents per share, compared to the previous semi-annual rate

Also on Thursday, Standard & Poor's lowered Kodak's long-term corporate credit rating to BBB- from BBB and short-term corporate credit rating to A-3 from A-2. The outlook is stable.

Charter Communications Inc.'s bank debt was also active in the secondary market. The paper headed slightly higher, still glowing from the company's announcement regarding an approximately $1.9 billion debt buyback.

The term loan B was quoted at 95¼ bid, 95¾ offered, up about one quarter of a point from Thursday.

A week ago, Charter revealed that it and its indirect subsidiary, CCH II, LLC, entered into agreements to purchase $609 million principal amount of its convertible senior notes and $1.3 billion principal amount of the senior notes and senior discount notes issued by Charter Communications Holdings LLC from a small number of institutional investors in privately negotiated transactions.

In exchange, CCH II issued $1.6 billion principal amount of 10.25% notes due 2010. CCH II also sold an additional $30 million principal amount of 10.25% notes for cash to cover accrued interest on notes exchanged.

"Not much going on but the usual stuff like Charter. The day before a holiday, people that haven't already taken the day off are heading out early if they can," said one market source, referring to the Jewish New Year holiday Rosh Hashanah on Saturday.

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