S&P ups KGen second-lien loan recovery

Standard & Poor's said it affirmed KGen LLC's B first-lien $325 million loan with a recovery rating of 1 and B- second-lien $150 million loan. The recovery rating on the second-lien loan was raised to 2 from 4.

S&P said the ratings incorporate the following risks: repayment on the loans depends on asset sales; in certain major maintenance years, there is inadequate cash flow from operations to pay interest expense; the company has exposure to commodity risk in the merchant generation market; the company's portfolio of assets lacks diversity and the facilities have refinancing risk, with seven-year bullet maturities, and interest-rate risk, with about 50% of the debt allowed to float during the loan's term.

However, the agency said the following strengths adequately mitigate the above risks: the Georgia Power power purchase agreement provides adequate cash flow in most years to pay interest expense during the loans' term; the facilities have a cash-sweep mechanism; the company has an adequate liquidity reserve; the portfolio has no construction risk and the facilities have a low purchase price.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.