S&P may cut LSP Batesville notes

Standard & Poor's said it placed the B rating on LSP Batesville Funding Corp.'s two tranches of senior secured bonds currently totaling $246.2 million on CreditWatch with negative implications.

The bonds helped to develop, design, build, finance, own, operate and maintain an 837 megawatt, natural-gas-fired, combined-cycle plant in Batesville, Miss. LSP Batesville Funding was established to co-issue the bonds with LSP Energy.

The watch follows increased concern that cash from operations may be insufficient to achieve the minimum 1.1x coverage appropriate for the B rating, according to the agency.

Despite markedly improved operating performance for the first quarter of 2009, cash flows have been pressured by penalties for the 2007 outage, lower J. Aron payments under the relevant PPA as a result of the units' call option repurchase and higher starts expenses incurred under the recently executed long-term parts agreement with Siemens Power Generation, the agency said.

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