S&P rates FirstEnergy notes BB

S&P said it assigned its BB issue-level rating and 3 recovery rating to FirstEnergy Transmission LLC's planned senior unsecured notes. The 3 recovery rating indicates meaningful (50%-70%; rounded estimate: 65%) recovery in default. The agency also placed the ratings on CreditWatch with negative implications.

“Our recovery rating on this debt is capped at 3, consistent with our approach for assigning recovery ratings to unsecured debt issued by BB category corporate entities because recovery prospects are highly vulnerable to impairment before default by additional debt issuance,” S&P said in a press release.

Proceeds are expected to be used to repay the balance on its revolving credit facility and for capital expenditures at its transmission subsidiaries.

“All of our other ratings on the companies are unchanged, including our BB issuer credit rating on FET's parent, FirstEnergy Corp. (FE), and those on all subsidiaries. We assess the companies' liquidity as adequate to cover their needs over the next 12 months, and we expect sources will exceed uses by at least 1.1x,” S&P said.

The agency said it aims to resolve the CreditWatch on FE and its subsidiaries in the coming months, pending the results of investigations, criminal allegations and civil lawsuits.

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