Moody's lowers LSP bonds to B3

Moody's Investors Service said it downgraded LSP Energy LP's senior secured bonds to B3 from B1.

The outlook remains negative.

The agency said the downgrade reflects the project's debt service coverage ratios, which have remained significantly below 1 times since 2007, and Moody's expectation that the project is likely to draw upon its debt service reserve in January if LSP's sponsor does not contribute additional capital. Moody's said it expects the service coverage ratio is unlikely to improve beyond approximately 1 times even if the project is able to resolve its near-term liquidity problems and avoid further operating issues.

The negative outlook considers the project's exposure to potential operating problems, its modest cash flow cushion against higher-than-expected operating costs as well as uncertainties as to whether the project's sponsor will be able to contribute additional equity, the agency said.

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