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Allegheny Energy seeks $2 billion secured loan
By Sara Rosenberg
New York, Oct. 9 - Allegheny Energy Inc. is looking to obtain up to $2 billion in a secured loan, Cindy Shoop, vice president of corporate communications told Prospect News on Wednesday. Towards this end, the Hagerstown, Md. energy company has filed an application with the Securities and Exchange Commission seeking approval for its subsidiary, Allegheny Energy Supply Company, LLC, to provide collateral support for the additional financing.
"We're in negotiations with the banks right now. We're looking to restructure the financing that we currently have in place," Shoop said. "We're talking to banks about options but we can't finalize terms or come to any agreement until we get SEC approval."
"It's important to recognize that Allegheny's businesses are fundamentally sound. There is enough cash flow on hand to meet all obligations. This is a short-term liquidity situation," Shoop added.
On Tuesday, Allegheny was declared in default under its trading agreements following the company's refusal to post additional collateral with trading counterparties. Upon defaulting on its trading agreements, cross-default provisions were triggered resulting in technical default under its principal credit agreements as well as those of its subsidiaries.
Unless the proposed financing is obtained, the company does not have the adequate liquidity to satisfy its collateral requirements, according to the SEC filing.
The SEC filing is part of Allegheny's "ongoing effort to obtain the liquidity necessary to cure existing default conditions and to resume posting collateral to trading counterparties," a news release said.
As of Sept. 30, the company had approximately $900 million outstanding under three existing credit facilities and other bank borrowings aggregating $335 million outstanding, according to the SEC filing.
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