MOODY'S REVIEWS CREDIT RATINGS OF NORTHWESTERN PUBLIC SERVICE COMPANY, DIRECTION UNCERTAIN (SR. SEC. AT A2)
New York, 9/9/1996 -- Moody's Investors Service placed the credit ratings of Northwestern Public Service Company (NWPS) under review with direction uncertain. The review is in response to NWPS's announcement that its wholly owned subsidiary, Northwestern Growth Corporation, intends to acquire Empire Energy Corporation, a propane retail distribution company, for total consideration of approximately $120 million. Separately, Northwestern Growth also entered into agreements to acquire $10 million of CGI Holdings, Inc. preferred stock. CGI is the parent company for Coast Gas Inc., a propane distributor in seven states, primarily in western regions of the United States. Subject to various terms and conditions being met, Northwestern Growth would subsequently have the opportunity to acquire all of CGI's common stock. Upon closing of the Empire Energy acquisition, which is subject to various regulatory approvals and other conditions, NWPS's nonregulated business investments, which include the company's cash and marketable securities portfolio, would surpass 50% of the company's consolidated assets.
Ratings under review are Northwestern Public Service Company first mortgage bonds rated A2, shelf registration of secured debt rated (P)A2, unsecured pollution control revenue bonds rated A3, the company's A3 counterparty rating, and NWPS Capital Financing I trust preferred capital securities and shelf registration for trust preferred capital securities, rated "a3" and (P)"a3", respectively. NWPS's Prime-1 short-term debt rating for commercial paper is under review as well.
As proposed, NWPS would finance the Empire Energy purchase primarily through the assumption of Empire's existing bank financing, in addition to cash, notes, and other consideration. Moody's review will focus on both the potential business risks and benefits to NWPS of its subsidiary's proposed acquisition of Empire and investment in CGI. Among the specific areas of focus will be the effects that financing of these transactions will have on consolidated debt leverage and whether expected synergies and growth in earnings and cash flow will be sufficient to compensate for additional fixed charges and increases in business risk. Moody's will also consider the terms and conditions under which Northwestern Growth might exercise its option to acquire CGI's common stock, including the method of financing.
Empire Energy Corporation, headquartered in Lebanon, Mo., is the eighth largest retail distributor of propane in the United States. It currently has 168 retail branches, serving 130,000 customers throughout 10 states, mostly in the Southeastern region of the United States.
CGI Holdings, Inc., headquartered in Watsonville, Ca., is the parent company of Coast Gas Inc., a retail distributor of propane. Coast currently serves about 75,000 customers in a seven state territory, primarily in the western region of the United States.
Northwestern Public Service Company, headquartered in Huron, South Dakota, is a combination electric and gas utility, which also has additional investments in nonregulated businesses, including sizable propane retail distribution.
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