Allegheny subsidiaries obtain further waivers on bank loan defaults

New York, Nov. 29 - Allegheny Energy Inc.'s subsidiaries Allegheny Energy Supply Co. LLC and Allegheny Generating Co. have received further waivers of the previously announced default under the credit agreements related to their refusal to post additional collateral. The waivers are now in effect through Dec. 31, extended from Nov. 29.

Allegheny was declared in default under its trading agreements after the company refused to post additional collateral with trading counterparties. Upon defaulting on its trading agreements, cross-default provisions were triggered, resulting in a technical default under its principal credit agreements as well as those of its subsidiaries.

The Hagerstown, Md. energy company and its subsidiaries are currently in negotiations with lenders under these and other bank facilities to secure additional funding and a long-term solution to liquidity needs, a news release said. It added that it is optimistic about reaching an agreement.

On Oct. 21, the company announced that it received approval from the Securities and Exchange Commission to borrow up to $2 billion in loans using assets of Allegheny Energy Supply as security.

Unless the financing is obtained, the company does not have the adequate liquidity to satisfy its collateral requirements, according to an SEC filing.

The proposed financing 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 previously 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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