Moody's downgrades LSP Energy

Moody's Investors Service said it downgraded LSP Energy LP's rating on its senior secured bonds to Caa2 from Caa1.

The outlook remains negative.

The action reflects the project's expected $4 million draw on its debt service reserve to make its January 2011 debt service payment leaving about $475,000 in the debt service reserve, which is equivalent to about five days of debt service, according to the agency.

The downgrade also considers the project's 2011 budget, which forecasts insufficient cash flow to fully meet debt service, the agency said.

The Caa2 rating also considers the uncertainties associated with a default at LSP Energy's parent company and the recent transfer of ownership from the previous owner, Complete Energy, to holding company lenders, Moody's noted.

The senior secured rating is supported by the potential for meaningful recovery in a default based on historical asset sale prices in the region and cash flow analysis, the agency added.

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