S&P rates American Electric Power units BBB

S&P said it assigned a BBB rating to American Electric Power Co. Inc.'s proposed equity units.

The equity units consist of a purchase contract that obligates the owners of the units to purchase American Electric's common stock as of mid-March 2022, S&P said, and a re-marketable junior subordinated note due 2024.

The agency said it assigned high equity credit to the issuance because of the mandatory convertible feature that requires the issuance of common equity within a three-year timeframe.

The proceeds will be used from the equity units to refinance outstanding debt issues, S&P said.

The rating is two notches lower than the A- issuer credit rating on American Electric, which reflects the subordination and deferability on the instruments for the first three years, the agency said.

The rating applies to the company's obligation to service the debt component, S&P said, as well as its obligation to issue common shares under the forward contract.

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