MOODY'S PLACES AEP AND SIX SUBSIDIARIES ON REVIEW FOR POSSIBLE DOWNGRADE AND CONFIRMS SIX SUBSIDIARIES IN ANTICIPATION OF THE COMPANY'S CORPORATE SEPARATION
New York, April 19, 2002 -- Moody's Investors Service has placed the credit ratings of American Electric
Power Company, Inc. (AEP) and six subsidiaries on review
for possible downgrade and confirms the credit ratings of six others in
anticipation of the pending corporate separation and the restructuring
of the company's corporate organization. The rating action reflects
the possible change in business risk and financial profile of the companies
that will be assuming the debt.
Ratings under review include the following:
· American Electric Power Company, Inc. Senior Unsecured
· Southwest Electric Power Company (SWEPCO) - Senior Secured
A1, Issuer Rating A2, Preferred Stock Baa1;
· AEP Resources, Inc. - Senior Unsecured Baa1;
· Central Power and Light Company (CPL)- Senior Secured
A3, Issuer Rating Baa1, Preferred Stock Baa3;
· Columbus Southern Power Company (CSP) - Senior Secured
A3, Senior Unsecured A3, Issuer Rating A3, Junior Subordinated
Debentures Baa1, Preferred Stock Baa2;
· Ohio Power Company (OP) - Senior Secured A3, Senior
Unsecured A3, Issuer Rating A3, Junior Subordinated Debentures
Baa1, Preferred Stock Baa2; and
· West Texas Utilities (WTU)- Senior Secured A2, Issuer
Rating A3, Preferred Stock Baa2.
Ratings confirmed include:
· American Electric Power Company, Inc. - Commercial
· Appalachian Power - Senior Secured A3, Senior Unsecured
Baa1, Issuer Rating Baa1, Junior Subordinated Debentures Baa2,
and Preferred Stock Baa3.
· Indiana Michigan - Senior Secured Baa1, Senior Unsecured
Baa2, Issuer Rating Baa2, Junior Subordinated Debentures Baa3,
Preferred Stock Ba1.
· Public Service Company of Oklahoma - Senior Secured A1,
Senior Unsecured A2, Issuer Rating A2, Preferred Stock Baa1,
· Kentucky Power - Senior Secured Baa1, Senior Unsecured
Baa2, Issuer Rating Baa2, Junior Subordinated Debentures Baa3
· RGS (AEGCO) Funding Corp. - Secured Lease Obligation
· RGS (I&M) Funding Corp. - Secured Lease Obligation
SWEPCO ratings were placed on review for possible downgrade to reflect
the company's increased leverage, ongoing high levels of capital
expenditures and lower cash coverages in comparison with similarly rated
peers. The review could conclude with more than a one notch downgrade.
Furthermore, Moody's will evaluate the implications of AEP Resource's
business risk, financial profile and debt levels under the new legal
structure at the time of restructuring. AEP Resources debt is currently
supported by parent AEP.
The review of AEP and its utility operating subsidiaries in Ohio and Texas
(OP, CPL, CSP, and WTU) will be reviewed in light of
where the debt will be placed after the utility subsidiaries restructure
from their currently integrated structures into wires and generation companies.
Moody's will include in its analysis the source and quality of cash flow,
liquidity and risk management, the effective leverage of the companies
and whether or not cash flow will reflect any structural subordination
at the restructured corporate entities, including the intermediate
holding companies. Moody's may also make further refinements to
the ratings as the company gets closer to concluding the reorganization.
The rating confirmations of the operating utility subsidiaries,
AP, I&M, PSO, KP, as well as RGS (AEGCO) Funding
Corp. and RGS (I&M) Funding Corp., reflect Moody's
expectation that the credit quality of these companies will not substantially
change after the company restructuring.
American Electric Power is an energy services company based in Columbus,
Ohio. Its utilities provide electric services to customers in 11
states. AEP also provides energy services worldwide and has holdings
in the U.S. and select international markets.
Moody's Investors Service
Vice President - Senior Analyst
Moody's Investors Service