Moody’s cuts FirstEnergy to junk

Moody’s Investors Service said it downgraded the ratings of FirstEnergy Corp., including its senior unsecured rating to Ba1 from Baa3. Moody’s also assigned a Ba1 corporate family rating, a Ba1-PD probability of default rating and an SGL-2 speculative grade liquidity rating to FirstEnergy. FirstEnergy’s Baa3 Issuer Rating is withdrawn. The outlook remains negative.

Moody’s affirmed the investment-grade ratings of FirstEnergy Transmission and the ratings of FirstEnergy’s Ohio utility subsidiaries, Ohio Edison Co., Toledo Edison Co. and Cleveland Electric Illuminating Co. and changed their outlooks to negative from stable.

“The disclosure of a payment by FirstEnergy to a government official who directly regulated the company’s Ohio utilities is likely to increase both regulatory risk and financial uncertainty for both FirstEnergy and its Ohio utility subsidiaries,” stated Jairo Chung, Moody’s analyst, in a press release.

“Furthermore, FirstEnergy’s decision to draw down $2 billion on its credit facilities is viewed as unusual behavior for an investment-grade utility holding company. It was done to preserve liquidity but could be a sign that additional negative developments related to corporate governance may occur, possibly limiting access to these credit facilities or the capital markets,” added Chung.

S&P cuts FirstEnergy

S&P said it downgraded FirstEnergy Corp. and its subsidiaries, including the issuer credit rating to BB from BB+. The agency affirmed Allegheny Generating Co.’s BB issuer credit rating.

Concurrently, S&P said it dropped the senior unsecured rating on FirstEnergy and FirstEnergy Transmission LLC to BB from BB+ based on the 3 recovery ratings, indicating meaningful (50%-70%; rounded estimate: 65%) recovery in default.

S&P said it also lowered the senior unsecured issue ratings on American Transmission Systems Inc., Jersey Central Power & Light Co., Metropolitan Edison Co., Mid-Atlantic Interstate Transmission, Ohio Edison Co., Pennsylvania Electric Co., and Trans-Allegheny Interstate Line Co., to BB+ from BBB- based on the 2 recovery ratings indicating substantial (70%-90%; rounded estimate: 85%) recovery in default.

S&P said it cut the senior unsecured issue ratings on Cleveland Electric Illuminating Co. to BB+ from BBB-based on the 2 recovery rating, indicating substantial (70%-90%; rounded estimate: 75%) recovery in default. Finally, the agency lowered the senior secured issue ratings on Cleveland Electric, Ohio Edison Co., Toledo Edison Co., and Monongahela Power Co. to BBB from BBB+, reflecting a 1+ recovery rating.

The downgrade follows FirstEnergy and some of its subsidiaries borrowing about $2 billion from its revolver credit facilities, S&P said. About $1.3 billion in availability remains.

The ratings remain on CreditWatch with negative implications, S&P said.

Moody’s ups NatWest Markets senior unsecured rating to A3

Moody’s Investors Service said it upgraded the long-term senior unsecured debt ratings of NatWest Markets plc to A3 from Baa2 and maintained the positive outlook.

The upgrade reflects Moody’s view of the recently announced accelerated de-risking, restructuring and re-focusing of the business; NatWest Markets’ business model will be more aligned with the corporate franchise of the NatWest Group plc’s ring-fenced banks, the agency said.

“As a result, the rating agency now considers the probability of affiliate support to have increased, and the losses falling upon NatWest Markets’ creditors in the event of the bank’s failure to be lower. On the other hand, Moody’s believes the probability of government support for the bank’s counterparty obligations, contractual commitments and operating obligations to have declined as the bank has shrunk,” Moody’s said in a press release.

S&P changes Con Ed view to negative

S&P said it revised the outlooks on Consolidated Edison Inc. (Con Ed) and its subsidiaries to negative from stable to reflect the increased possibility of political interference in New York state’s regulatory construct. The agency affirmed all ratings, including the A- issuer credit rating.

The outlook changes stem from Nov. 19 announcements by the New York governor’s office that Consolidated Edison Co. of New York Inc. (Cecony) faces potential penalties and possible certificate revocation because of its response to power outages in Manhattan and Brooklyn in July 2019 and that Cecony, Orange and Rockland Utilities Inc. (O&R), and Central Hudson Gas & Electric Corp. face potential penalties, and Cecony and O&R also potentially face certificate revocation, for their response and service-restoration efforts following Tropical Storm Isaias in August 2020,” the agency said in a press release.

Moody’s changes Principal view to positive

Moody’s Investors Service said it changed the outlook to positive from stable and affirmed the Baa1 issuer rating of Principal Financial Services, Inc.

“Commenting on the positive outlook, the rating agency said it reflects the group’s consolidated good profitability, relatively strong financial flexibility, with financial and total leverage each estimated in the 20%-25% range at Sept. 30, 2020, similar to 2019. Earnings have remained strong, resulting in earnings coverage in the range of 8x-10x through the first nine months of 2020, similar to 2019, with cash coverage at 6.9x in 2019,” Moody’s said in a press release.

The outlook revision also brings it into line with its parent Principal Financial Group, Inc.’s positive outlook.

Moody’s rates AT&T notes Baa2

Moody’s Investors Service said it assigned a Baa2 rating to AT&T Inc.’s proposed senior unsecured notes to be issued in connection with its debt exchange offer for certain outstanding notes.

“The exchange offer will push out near and medium-term maturities on certain upcoming debt and will be leverage neutral,” Moody’s said in a press release.

“AT&T’s Baa2 senior unsecured rating reflects leading positions, important brands, scale and revenue diversity that collectively result in substantial qualitative credit strength. AT&T, a market leader in nearly all of its businesses, has valuable assets, predictable revenue, and healthy margins. Putting aside the impact from Covid-19, these qualitative strengths are offset by outsized shareholder returns, anemic top-line growth and subscriber losses in several of its important segments,” the agency said in a press release.

The outlook is stable.

Moody’s assigns Brookfield notes Baa3

Moody’s Investors Service said it gave a Baa3 rating to Brookfield Finance I (UK) plc’s new perpetual subordinated notes, which are guaranteed on a subordinated basis, by Brookfield Asset Management Inc.

The Baa3 rating reflects both their subordinated status and the guarantor, whose senior unsecured rating is Baa1, Moody’s said.

Moody’s said it assigned a stable outlook.

S&P corrects Arch, Fidelis notes ratings

S&P said it lowered its issue-level rating on the $1 billion of 3.635% senior notes issued June 23 by Arch Capital Group Ltd. to BBB+ from A- and its rating on the $330 million of 4.875% senior notes issued June 12 by Fidelis Insurance Holdings Ltd. to BBB- from BBB.

“We lowered the ratings on these two securities to correct an error in our assessment of potential principal payment risk associated with these instruments at their maturity dates. However, these rating actions don’t reflect any deterioration of the financial strength of Arch or Fidelis, nor do they affect our treatment of these bonds in the companies’ respective capital adequacy assessments,” S&P said.

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