Allegheny Energy holds bank meeting Friday for $2.062 billion facility

By Sara Rosenberg

New York, Dec. 6 - Allegheny Energy Inc. launched a $2.062 billion credit facility for the company and its subsidiaries on Friday, according to a market source. Citibank, JPMorgan and Scotia Capital are the lead banks on the deal.

The loan consists of a $1.148 billion term loan with an interest rate of Libor plus 400 basis points for Allegheny Energy Supply, a $269 million senior secured term loan secured by Springdale assets with an interest rate of Libor plus 400 basis points, a $470 million senior secured additional financing term loan with an interest rate of Libor plus 600 basis points and a $175 million senior revolver with an interest rate of Libor plus 500 basis points and a commitment fee of 75 basis points, the source told Prospect News. All tranches are scheduled to mature in April of 2005.

Proceeds will be used to refinance existing debt.

In early October, Allegheny Energy announced that it was looking to obtain up to $2 billion in a secured loan but in order to secure a loan the company needed approval from the Securities and Exchange Commission, which was granted during the latter half of October.

"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," Cindy Shoop, vice president of corporate communications previously told Prospect News.

The Hagerstown, Md. energy company was previously 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.

The refinancing 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 had 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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