S&P rates KGen loans B+, B-

Standard & Poor's said it assigned its preliminary B+ rating to KGen LLC's $225 million senior secured term loan tranche A. At the same time, S&P assigned its preliminary B- rating and 3 recovery rating to KGen's $250 million senior secured term loan tranche B. The outlook is stable.

KGen is a wholly owned subsidiary of KGen Partners LLC, which is owned 100% by MatlinPatterson Global Opportunities Partners II.

The proceeds from the loans will be used to refinance an existing $325 million loan, repay a $50 million seller note and fund a required liquidity reserve.

S&P said the rating on KGen incorporates that repayment on the loans depends on asset sales, in certain major maintenance years, there is inadequate cash flow from operations to pay interest expense, a portfolio of assets concentrated in one power pool and refinancing risk with seven-year bullet maturities.

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