Merger/acquisition target NorthWestern Corp., the Sioux Falls, SD-based utility holding company, received a boost in its credit ratings to “BB+” by Standard & Poor’s Ratings Services Friday, while the rating agency kept its CreditWatch with a “developing implications” designation.
Management at NorthWestern “continues to take positive steps” in its regulatory relations, resolving pending litigation and with noncore asset sales, S&P said in announcing the ratings increase. S&P also praised the holding company’s investments and debt reduction since it emerged from Chapter 11 bankruptcy nearly 18 months ago. NorthWestern’s outstanding debt totaled $743 million at the end of last year.
Nevertheless, S&P said the somewhat uncertain CreditWatch designation reflected several offers to buy NorthWestern. Neighboring South Dakota-based Black Hills Corp.’s has an outstanding offer to purchase NorthWestern’s electric and gas utility holdings for all stock or stock, plus cash. A second offer to purchase the company has come from a public-sector consortium of Montana cities called Montana Public Power Inc. The latter would be an all-debt financing acquisition.
S&P’s credit analyst Gerrit Jepsen said the rating agency believes “the existence of the two offers increases the likelihood that NorthWestern will be sold.” He added that with the pending offers, “uncertainty remains” regarding the company’s future credit ratings, which could be raised or lowered.
S&P said it will resolve its CreditWatch uncertainty when NorthWestern’s board of directors and shareholders decide which, if either, of the outstanding offers to accept, “or when they firmly reject both offers. It is unclear what the timetable for resolution will be, given recently filed litigation by existing shareholders and the possibility of a shareholder proxy contest,” Jepsen said.
“If an offer is accepted, we will want to assess the combined entity’s creditworthiness before assigning new credit ratings. If all offers are rejected, we will likely affirm the existing ratings and assign a positive outlook, assuming NorthWestern’s financial performance is still on an improving trend.”
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