BW5457 APR 10,2003 10:15 PACIFIC 13:15 EASTERN
( BW)(NY-FITCH-RATINGS/TEC) Fitch Rates Toledo Edison's Pollution Control Bonds 'BBB-'
NEW YORK--(BUSINESS WIRE)--April 10, 2003--Fitch Ratings expects to assign a 'BBB-' rating to the $33.2 million issue of the Ohio Water Development Authority's pollution control revenue refunding bonds, series 2000-A (The Toledo Edison Company (TEC) Project) and $34.1 million pollution control revenue refunding bonds, series 2000-A (The TEC Project). The bonds are to be remarketed during the week of April 14, 2003 and secured by two separate series of TEC First Mortgage bonds with Morgan Stanley as remarketing agent. The Rating Outlook is Negative.
On April 17, 2003, TEC expects to remarket the bonds without the letters of credit (LOC) protection currently in place. The remarketed bonds will be secured solely by TEC first mortgage bonds (FMBs). In addition, the remarketed bonds will accrue interest at commercial paper rates to be determined by the remarketing agent and will be subject mandatory purchase on July 18, 2003. Investors should consider that if a bankruptcy petition were to be filed by or against TEC within 90 days of April 17, 2003, the security provided by the FMBs may be challenged under certain interpretations of bankruptcy law.
The ratings reflect TEC's weak interest coverage ratios and high debt levels including off-balance sheet financing. The ratings also assume that the restart of Davis-Besse by mid-2003 will allow the de-leveraging process at TEC, which was slowed by cash flow pressures associated with the outage, to continue at a more rapid pace. The Rating Outlook Negative reflects ongoing financial pressure associated with the prolonged Davis-Besse nuclear plant outage, which has been out-of-service since February 2002. TEC owns a 49% interest in the 883-mW nuclear plant and the remainder is owned by affiliate Cleveland Electric Illuminating. FirstEnergy Nuclear Operating Company will be required to demonstrate to the NRC that it has addressed all safety/management issues at the unit, including leadership and oversight issues, before the commission will allow the plant to resume commercial operation. Management's latest estimate for restarting the plant is by the end of Spring 2003. While management has taken steps to hedge TEC's estimated peak energy supply needs in 2003, prolonged delay of the plant's return to commercial operation could result in additional costs, potentially affecting the continued viability of the plant.
--30--AC/sf* CONTACT: Fitch Ratings Philip Smyth, 212/908-0531 Robert Hornick, 212/908-0523 (New York) Media Relations: James Jockle, 212/908-0547 (New York) KEYWORD: NEW YORK INDUSTRY KEYWORD: BOND/STOCK RATINGS SOURCE: Fitch Ratings