American Electric Power Co. Inc.'s $700 Million Equity Unit Offering Rated 'BBB'


NEW YORK (S&P Global Ratings) March 13, 2019--S&P Global Ratings today 
assigned its 'BBB' issue-level rating to American Electric Power Co. Inc.'s 
(AEP) proposed equity units. The equity units consist of a purchase contract 
that obligates the owners of the units to purchase AEP's common stock as of 
mid-March 2022, and a remarketable junior subordinated note due 2024. We have 
assigned high equity credit (100% equity treatment) to the issuance because of 
the mandatory convertible feature that requires the issuance of common equity 
within a three-year timeframe. The company intends to use the net proceeds 
from the equity units to refinance outstanding debt issues.

We notch the equity units two notches below our 'A-' issuer credit rating on 
AEP, which reflects the subordination and deferability on the instruments for 
the first three years. The rating applies to the company's obligation to 
service the debt component, as well as its obligation to issue common shares 
under the forward contract. It does not address the safety of principal or the 
units' value.

AEP is a holding company that owns vertically integrated regulated electric 
utilities and transmission and distribution only operations across 11 states 
(Arkansas, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Ohio, 
Oklahoma, Texas, Virginia, and West Virginia), serving 5.4 million customers. 
Our issuer credit rating on AEP is 'A-' and the outlook is stable (see the 
full analysis on AEP published March 7, 2019).
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