In separate financial moves this week, Edison International, the parent of near-bankrupt Southern California Edison, and the State of California will be looking at separate bond issues for which the financial markets have little appetite. They could be harbingers of Wall Street’s ultimate level of acceptance of the state’s planned largest public bond sale ever in late August or early September.

The market’s reception to a third and completely separate $1 billion general obligation bond sale by California Tuesday was expected to give the clearest indication yet of what the energy bond sales later might fetch. Traders were reportedly expecting the state to pay above-market interest rates (approaching 10%, perhaps) on the bonds to get the investors it seeks.

Further complicating the financial landscape is the apparently continuing inaction by California state lawmakers in passing new laws to help set up the implementation of the governor’s proposed memorandum of understanding (MOU) with the Edison utility or an alternative that attempts to accomplish the utility bailout.

One question from debt-holders Tuesday was how willing the utility would be to follow a creditors committee proposal and sell other generation assets to out-of-state energy companies in the event the utility rescue continues to flounder. Edison officials refused to speculate, noting the sale of the transmission assets in the proposed MOU would be expected to accomplish the same thing.

Regarding the much larger state electricity revenue bond sale in late summer, there are mounting concerns this week about how secure the revenue sources for repaying the bondholders (principally mutual funds) will be with the involvement of the federal bankruptcy court lurking specifically in the case of Pacific Gas and Electric Co. and potentially for Southern California Edison.

Meanwhile, Edison’s parent is working with investment bankers such as the Goldman Sachs Group to raise $1.2 billion to pay off its existing $618 million bank debt that will come due June 30, $250 million of notes due July 18, and $350 million of floating rate debt notes due Nov. 1 — all through a complex refinancing that includes establishing an interim holding company for its power plant developer/operator Edison Mission Energy that would sell exclusively overseas more than $1.2 billion in seven-year, senior secured notes. It is called Edison Mission Energy Holding Co. The sale would not be registered with the Securities and Exchange Commission and the sole asset of the new interim holding company is entirely stock in the Edison power plant developer/operator.

Edison Senior Vice President/CFO Ted Craver said Tuesday in a regular debt holders’ conference call that marketing of the sale is already under way, and he expects to complete the sale of the new notes by the end of this month. Given the risks facing its utility subsidiary and the lack of political solutions to its financial quagmire, Wall Street bond analysts are unsure what sort of reception an Edison bond sale will garner.

Moody’s Investors Service Tuesday confirmed a long-term debt rating for Edison Mission Energy of Baa3 in response to the Edison International’s announced refinancing plans, noting that nothing has changed for the subsidiary that already has “predictable sources of diversified cash flow available” to it. The parent company, Edison International, however, Moody’s said was under review for possible ratings upgrades from its current junk bond status Caa3 because the refinancing plan carries “positive implications” for the beleaguered utility holding company.

Edison officials also reported Tuesday that the various QF lawsuits against the Edison utility are stayed while all of the filings are consolidated into one case in a state Superior Court in Los Angeles. In the meantime, Edison said, work moves ahead at the California Public Utilities Commission for a settlement among all the parties.

On its business meeting agenda Thursday, the CPUC will have three other issues related to Edison’s proposed MOU with the governor to restore its financial creditworthiness. Edison officials said Tuesday they are unsure whether the regulators will take action at that time.

©Copyright 2001 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.