Moody's: NiMo Bankruptcy Possible

Fortnightly Magazine - July 1 1996
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DC PSC RFP Technical Consultant for Formal Case (FC) No. 1156
Moody's Investors Service downgraded the long-term credit ratings of Niagara Mohawk Power Corp. (NiMo) on April 25, citing the utility's "limited progress" in achieving the goals set forth in its "PowerChoice" proposal, among other concerns. PowerChoice calls for renegotiating

power-purchase contracts with nonutility generators, offering customers a choice of electric suppliers, and freezing rates if NiMo is given the opportunity to recover stranded costs.

Pointing to the uncertainty and potential volatility of the situation, Moody's went so far as to pose the possibility of a voluntary bankruptcy filing. In fact, the utility's 1995 "Form 10K" filing indicated the possibility of a restructuring under Chapter 11 of the U.S. Bankruptcy Code, admitting material challenges to maintaining its financial condition in the face of expanding competition and weak sales. NiMo eliminated its common dividend in January 1996. (em LB

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