S&P rates Covanta loans B+, B-

Standard & Poor's said it assigned its B+ debt rating and 2 recovery rating to Covanta Energy Corp.'s $250 million first-lien secured term loan, $100 million revolving credit facilities and $340 million letter-of-credit facility. S&P also assigned its B- debt rating and 5 recovery rating to Covanta's $425 million second-lien term loan.

Furthermore, S&P revised the CreditWatch implications for its B corporate credit rating on Covanta to positive from developing. The new bank loan ratings are not on CreditWatch.

At the same time, S&P affirmed its BB- rating on MSW Energy Holdings II LLC's (MSW II) senior secured notes due 2010 and removed the rating from CreditWatch with negative implications where it was placed on Feb. 1, 2005. The outlook on MSW II's notes is stable.

S&P said the rating actions follow S&P's review of Covanta's prospective business and financial risk after its proposed acquisition of American Ref-Fuel Holdings Corp., the parent of MSW I and MSW II, from DLJ Merchant Banking Partners and its affiliated co-investors and AIG Highstar Capital LP and certain of its affiliates.

S&P said it has determined that following the acquisition's closing, the corporate credit rating on Covanta will be raised to B+, the rating on MSW I's debt will be lowered to BB-, the rating on MSW II's debt will remain at BB- and the rating on ARC and ARC's project debt will be lowered to BB+. The outlook will be stable.

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