S&P downgrades GenOn

S&P said it lowered its issuer credit rating on GenOn Energy Inc. and its affiliates to D from CC.

The agency also said it lowered the ratings on the company's senior secured debt to D from CCC, and the ratings on the company's senior unsecured debt to D from CCC- and to D from CC.

Recovery ratings on all issues are unchanged.

The downgrades stem from a recent announcement by GenOn Energy that it obtained sufficient consents on its GenOn Americas Generation notes to pursue an exchange offering, which the company estimates will have consideration at about 92% of face value plus consent fee if applicable, S&P said.

In the exchange, GenOn Energy noteholders will become the effective equity holders of the company, the agency explained.

S&P said it believes this constitutes a distressed exchange and an event of default under its criteria due to the less-than-full compensation and already weak credit quality of the company.

GenOn's fortunes had declined in recent years as weak gas pricing and low demand growth in key power markets contributed to diminished cash flow, the agency said.

This increased leverage, the agency added.

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