Avista $150 million notes basically "a high yield piece of paper"

By Paul A. Harris

St. Louis, Mo., Dec. 10 - Avista Corp.'s offering of $150 million of first mortgage bonds will be marketed to both investment grade and high yield accounts, syndicate sources told Prospect News Monday.

"The company is on negative watch by both rating agencies," one source commented. "When you are in the Baa3/BBB- range (the ratings on the new Avista notes), and you're on negative outlook, you're basically trading a high yield piece of paper.

"They have a bunch of medium-term notes out there that have all different maturities, and are very small in size," the source added. "This will be one of two or three other bonds that they have out there which have some substantial liquidity to them."

The syndicate on the notes includes Goldman Sachs & Co. as bookrunner along with BNY Capital Markets, Fleet Securities and TD Securities, sources said.

Another high yield syndicate source compared the new issuance from the Spokane, Wash. energy company to bank debt.

"From what I understand they ended up deciding against a high yield structure," the source commented.

"It's a six-'B' deal," the source added. "First mortgage bonds (comprise) a first lien. That's basically like bank debt.

"They're basically taking the place of a bank debt, whereas if they were going to do high yield they would have financed their existing first mortgage bonds with something unsecured that would have given them room to have a bank deal to fund future growth."

Maturity on the Avista bonds has yet to be determined, another source said.

"They will either be three- or five-year bonds," the source commented.

The Rule 144A notes will be non-callable, the source said, adding that proceeds will be used to repay short-term debt.

An investor call is scheduled for Tuesday, sources said. The deal is expected to price by mid-day Wednesday.

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