Fitch cuts Edison Mission, Midwest Generation

Fitch Ratings said it lowered Edison Mission Energy and Midwest Generation LLC's long-term issuer default ratings to CC from B-.

Edison Mission's senior unsecured debt was downgraded to C/RR5 from CCC/RR5, and its recovery rating remains unchanged at RR5.

Midwest Generation's secured working capital facility was lowered to CCC/RR3 from BB-/RR1 and its recovery rating for the secured working capital facility was revised to RR3 from RR1.

The downgrade reflects low power prices that represent a challenge to the companies' long-term financial viability; Edison's unsustainably high debt leverage; operating losses, environmental capital expenditure requirements and pending debt maturities in 2013 and 2016; and the termination of Edison's revolving credit facility and inability to attract third-party funding for the Homer City generating station underscores, according to the agency.

There is sufficient liquidity for the near term, but a bankruptcy filing is a distinct possibility in the coming 12 to 24 months, Fitch said.

Edison is expected to book losses and negative free cash flow in 2012 and 2013. Debt to EBITDA is estimated to be negative in 2012 and 2013 and 71x in 2014, the agency said.

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