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S&P cuts FirstEnergy Solutions, units to junk
S&P said it removed the ratings on FirstEnergy Solutions Corp. (FES), and affiliates Allegheny Energy Supply Co. LLC (AYE Supply), Allegheny Generating Co. (AEG), FirstEnergy Generation Corp. (FEG), FirstEnergy Nuclear Generation Corp. (FENG) from CreditWatch, where they were placed with negative implications on July 22.
S&P lowered the corporate credit ratings on FES, AYE Supply and AEG to BB- from BBB-. The outlook is stable.
S&P also lowered the senior secured debt ratings on FEG, FENG and AYE Supply to BB+ from BBB-. S&P assigned a 1 recovery score to the senior secured debt at these companies, indicating an expectation for very high recovery (90%-100%) under a payment default.
S&P also lowered the issue-level ratings on the senior unsecured debt at all affiliates to BB-. The agency assigned a 3 recovery rating to this debt at FES, FENG and FEG, indicating an expectation for meaningful (50%-70%; lower end of the range) recovery in a default. S&P also assigned a 3 recovery rating for the unsecured debt at AYE Supply and AEG, indicating an expectation for meaningful (50%-70%; higher end of the range) recovery in a default scenario.
The downgrade stems from our reassessment of FES' and affiliates' business risk profile to fair from satisfactory, reflecting that economic generation has progressively declined and we expect it to be under further pressure as a result of higher production costs relative to market peers and the loss of parental support uplift in the rating as per our conclusion that the subsidiaries are no longer strategic to parent FirstEnergy, said S&P credit analyst Aneesh Prabhu in a news release.
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