S&P downgrades Longview

Standard & Poor’s said it lowered the preliminary debt rating on Longview Power LLC’s $300 million senior secured term loan due 2021 and $25 million senior secured revolving credit facility due 2021 to B+ from BB- due to the impact of increasing the term loan offering to $300 million from $250 million.

The agency also said it revised the recovery rating on the credit facilities to 2 from 1, indicating 70% to 90% expected default recovery.

Longview is a limited-purpose, bankruptcy-remote entity that owns a 700 net-megawatt coal-fired power plant in West Virginia and a mining subsidiary, Mepco, that supplies coal to the plant, S&P said.

Boiler tube leaks have been a major factor in the company’s poor operational performance since the plant started operations in 2011, contributing to lower-than-expected cash flow and the eventual bankruptcy filing in August 2013, the agency said.

One of the plan’s major goals is to repair the leaks. Most of the operational problems stem from construction phase work, S&P added.

The stable outlook is based on an expectation that Longview will be able to complete its repair program in 2015 and then return to operation and that cash flow will be fairly stable thereafter, the agency said.

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