S&P cuts K2 Pure to negative

Standard & Poor's said it affirmed the B rating on K2 Pure Solution NoCal LP's $121.5 million senior secured bank facility and revised the outlook to negative from stable.

The outlook revision reflects concerns about the project's ability to complete construction as per management's projections and how it will plans to fund cost overruns from equity contributions, S&P said.

K2 is a special-purpose entity indirectly owned by K2 Pure Solutions, which is indirectly owned by Centre Partners and K2's executive management team, S&P said.

The ratings reflect the company's aggressive construction schedule, volatile cash flow generation profile and dependence on merchant revenue to avoid a covenant violation with the project's creditors, the agency said.

The outlook is negative.

S&P said it believes construction is the most significant risk at this time, as the project can't generate cash flow until the facility is built and fully operational.

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