Several U.S. utilities have averted immediate liquidity crisis by reaching refinancing terms with bank lenders during the first quarter of 2003, according to an article appearing in the inaugural edition of the 'Global Power Quarterly' newsletter by Fitch Ratings. Fitch identifies restructuring or rescheduling outstanding obligations with bank creditors as a vital challenge for U.S. utilities in 2003, a challenge that to date has been met most recently by Dynegy Holdings, Inc. and Reliant Resources, Inc.

"Banks have required some form of security in exchange for extended maturities," said Hugh Welton, Senior Director, Fitch Ratings. "The scope of collateral has been significant for distressed energy merchants, who have been pledging virtually all unencumbered assets and/or subsidiary stock to their banks." Despite the progress, however, many utilities must meet near-term refinancing requirements while in the midst of ongoing regulatory investigations and a cyclical downturn in wholesale power prices. Although Allegheny recently averted immediate bankruptcy by closing a $2.4 billion secured bank credit facility, the company is still under pressure to sell assets and tap new sources of external capital because of the strict new facilities. AES Corp. is also under pressure as they is are required to pay down 50% of a $1.62 billion multi-tranche senior secured credit facility by November 2004. Despite a recent string of Fitch downgrades on various U.S. utilities, the benefit of execution of these secured facilities generally outweighs the negative aspects associated with the potential alternatives. 'The second quarter of 2003 will see more intense negotiations between bank creditors and several distressed utilities facing fast-approaching refunding deadlines, such as Aquila, Calpine and Mirant' said Welton. Other articles appearing in 'Global Power Quarterly' include an update on California utilities and a discussion on the power sector in Chile. 'Global Power Quarterly', a quarterly newsletter discussing trends within the power and gas markets in the United States and worldwide, is available on the Fitch Ratings web site at 'www.fitchratings.com'

Despite the progress, however, many utilities must meet near-term refinancing requirements while in the midst of ongoing regulatory investigations and a cyclical downturn in wholesale power prices. Although Allegheny recently averted immediate bankruptcy by closing a $2.4 billion secured bank credit facility, the company is still under pressure to sell assets and tap new sources of external capital because of the strict new facilities. AES Corp. is also under pressure as they is are required to pay down 50% of a $1.62 billion multi-tranche senior secured credit facility by November 2004.

Despite a recent string of Fitch downgrades on various U.S. utilities, the benefit of execution of these secured facilities generally outweighs the negative aspects associated with the potential alternatives. 'The second quarter of 2003 will see more intense negotiations between bank creditors and several distressed utilities facing fast-approaching refunding deadlines, such as Aquila, Calpine and Mirant' said Welton.

Other articles appearing in 'Global Power Quarterly' include an update on California utilities and a discussion on the power sector in Chile. 'Global Power Quarterly', a quarterly newsletter discussing trends within the power and gas markets in the United States and worldwide, is available on the Fitch Ratings web site at 'www.fitchratings.com'