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S&P flips Algonquin Power view to negative
S&P said it revised the outlook for Algonquin Power & Utilities Corp. (APUC) and its subsidiaries, Liberty Utilities Co. (LuCo), Liberty Power (LPCo), Liberty Utilities GP 1 (LU GP), and the Empire District Electric Co., to negative from stable. The agency also placed the rating on LU GP's senior unsecured debt, which is guaranteed by LUCo, on CreditWatch with negative implications. Concurrently, S&P affirmed their BBB issuer ratings.
The outlook revision follows Algonquin reporting it agreed to buy Kentucky Power Co. (KPCo) and a Kentucky transmission entity from American Electric Power Co. Inc. (AEP) for about $2.85 billion, including assumed debt of about $1.2 billion.
APUC intends to finance the $1.65 billion deal, excluding the assumption of about $1.2 billion of debt, with a common equity offering of C$800 million, with an over-allotment option that could bring total issuance proceeds to C$920 million). The remaining funding is expected to be obtained through hybrid debt, equity units, or the sale of non-regulated assets or investments, subject to the regulatory approval process and prevailing market conditions, S&P said.
“The negative outlook on APUC reflects the remaining uncertainty regarding the company's funding for its KPCo acquisition following the announced common equity issuance. Our current base-case scenario includes adjusted funds from operations (FFO) to debt in the 13%-14% range through 2022 after completing the KPCo acquisition,” the agency said in a press release.
S&P put LU GP’s unsecured debt on negative watch indicating the possibility for it to be structurally subordinated after deal closes.
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