S&P downgrades Allegheny

S&P said it lowered the issuer credit ratings on Allegheny Energy Supply Co. LLC and Allegheny Generating Co. to B+ from BB-.

The ratings remain on CreditWatch with developing implications.

The agency also said it lowered the rating on Allegheny Energy Supply's secured debt to BB from BB+. The 1 recovery rating on the secured debt is unchanged, indicating 90% to 100% expected default recovery.

S&P also said it affirmed the BB- rating on the companies' unsecured debt and revised the recovery rating on the debt to 2 from 3. The 2 recovery rating indicates 70% to 90% expected default recovery.

The ratings remain on CreditWatch with developing implications.

S&P also said it raised the rating on the company's $73.5 million solid waste disposal refunding revenue bonds due 2037, which are guaranteed by Monongahela Power, to BBB- from BB+ and removed the rating from CreditWatch with developing implications, where they were placed in November.

The agency also said it withdrew the AA- rating and stable outlook on the company's $9.3 million 5.50% pollution control revenue (Allegheny Energy Supply Co. LLC) bonds series 1999E due 2029 because the bonds were repaid.

The CreditWatch placement reflects news of the sale of several key generating assets, S&P explained.

While this could also decrease debt somewhat concurrently and contribute to stronger ratios, it could significantly limit the scale of the generator and lead to substantial reliance on a few coal assets, the agency said.

S&P said it expects to resolve the CreditWatch placement when more details are released in the next 60 days.

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