Approximately $1.3 billion of debt affected
New York, February 03, 2011 -- Moody's Investors Service placed the ratings for Avista Corporation (Avista),
and its affiliate Avista Corp. Capital Trust II on review for possible
upgrade. The review includes Avista's Baa1 senior secured
rating and its Baa3 senior unsecured rating (see a complete list of affected
debt below).
The review for possible upgrade primarily reflects recent regulatory rate
case decisions which have improved the predictability of Avista's
cash flow and cost recovery over the near term.
"Given the WUTC's November 19, 2010 rate settlement approval,
and a similar action taken by the IPUC in late September 2010, it
appears that Avista's key regulatory jurisdictions will continue
to support Avista's ability to generate credit metrics of CFO pre-Working
Capital to Interest around 4.0x and CFO pre-Working Capital
to Debt in the mid to high teen's, over the foreseeable future"
said Kevin Rose, Vice President -- Senior Analyst.
The review for possible upgrade will focus on Avista's ability to
address each of its near-term credit facility maturities in a timely
and financially prudent manner. Avista has two committed credit
facilities, a $320 million facility and a $75 million
facility, both of which expire on April 5, 2011 and are secured
by First Mortgage Bonds. In addition, the review period will
allow for a complete assessment of year end 2010 financial results,
which we anticipate will approximate the aforementioned cash flow metric
levels of 4.0x interest coverage and high teen's debt coverage.
"Moody's gives qualitative ratings consideration to the prospect
that Avista will be able to renew suitable credit facilities in order
to maintain sufficient liquidity, but Moody's does not incorporate
the assumption of unfettered market access into the quantitative aspect
of our liquidity analysis" Rose added. "In Moody's
opinion, the secured nature of the credit facilities somewhat constrains
Avista's liquidity flexibility, since the typical investment
grade issuer (having an unsecured facility) can use collateral as an option
to improve bank credit access during periods of unforeseen liquidity stress.
While the security is in place solely at Avista's discretion,
it is the near-term credit facility expiration that is the focus
of Moody's current quantitative liquidity concerns."
An upgrade to Avista's ratings could occur with the successful renewal
of its $395 million of credit facilities and the company having
evidenced financial performance that is in-line with cash flow
levels exhibited over the past two years.
A downgrade is unlikely in the near to intermediate term, given
the current review for upgrade; however, Avista could become
subject to a rating downgrade if the company were to have trouble renewing
adequate liquidity resources over the near-term, or if they
were to receive unsupportive regulatory treatment in subsequent rate cases
over the long-term.
The principal methodology used in this rating was Regulated Electric and
Gas Utilities published in August 2009.
Avista Corp. is an energy company, primarily involved in
the production, transmission and distribution of energy through
its Avista Utilities division. Avista is headquartered in Spokane,
Washington.
On Review for Possible Upgrade:
..Issuer: Avista Corp.
.... Issuer Rating, Placed on Review
for Possible Upgrade, currently Baa3
....Multiple Seniority Medium-Term
Note Program, Placed on Review for Possible Upgrade, currently
(P)Baa1
....Multiple Seniority Shelf, Placed
on Review for Possible Upgrade, currently a range of (P)Ba2 to (P)Baa1
....Multiple Seniority Shelf, Placed
on Review for Possible Upgrade, currently a range of (P)Ba2 to (P)Baa1
....Multiple Seniority Shelf, Placed
on Review for Possible Upgrade, currently a range of (P)Ba2 to (P)Baa1
....Senior Secured Bank Credit Facility,
Placed on Review for Possible Upgrade, currently Baa1
....Senior Secured First Mortgage Bonds,
Placed on Review for Possible Upgrade, currently Baa1
....Senior Secured First Mortgage Bonds,
Placed on Review for Possible Upgrade, currently Baa1
....Senior Secured First Mortgage Bonds,
Placed on Review for Possible Upgrade, currently Baa1
....Senior Secured Medium-Term Note
Program, Placed on Review for Possible Upgrade, currently
(P)Baa1
....Senior Secured Regular Bond/Debenture,
Placed on Review for Possible Upgrade, currently Baa1
....Senior Unsecured Medium-Term Note
Program, Placed on Review for Possible Upgrade, currently
(P)Baa3
....Senior Unsecured Regular Bond/Debenture,
Placed on Review for Possible Upgrade, currently Baa3
..Issuer: Forsyth (City of) MT
....Senior Secured Revenue Bonds, Placed
on Review for Possible Upgrade, currently Baa1
....Senior Secured Revenue Bonds, Placed
on Review for Possible Upgrade, currently Baa1
..Issuer: Stevens (County of) WA, Public Corporation
....Senior Unsecured Revenue Bonds,
Placed on Review for Possible Upgrade, currently Baa3
...Issuer Avista Corp. Capital II
....Trust preferred securities, Placed
on Review for Possible Upgrade, currently Ba1
Outlook Actions:
..Issuer: Avista Corp.
....Outlook, Changed To Rating Under
Review From Positive
..Issuer: Avista Corp. Capital II
....Outlook, Changed To Rating Under
Review From Positive
New York
Kevin G. Rose
Vice President - Senior Analyst
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
William L. Hess
MD - Utilities
Infrastructure Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews Avista's ratings for possible upgrade