Moody's rates Midwest Generation

Moody's Investors Service said it assigned a Ba3 rating to the proposed $900 million of senior secured credit facilities and a B1 rating to the proposed $1 billion of second-priority senior secured notes of Midwest Generation LLC.

The outlook for Midwest Generation is revised to stable from negative.

Moody's also affirmed the ratings of affiliates Edison Mission Energy (B2 senior unsecured) and Mission Energy Holdings Co. (Caa2 senior secured debt), and changed the outlook for these issuers to stable from negative.

Moody's said the ratings for the notes and bank credit facilities for Midwest Generation consider: 1. the cost competitive position of Midwest Generation's coal assets within the MAIN region; 2. the degree of consolidated leverage for Midwest Generation relative to the level of expected sustainable cash flow; and, 3. the substantial reliance on cash flow from Edison Mission Energy through payments under an intercompany note.

The ratings also consider: 4. that future cash flows are highly dependent upon prices received in the wholesale merchant market; 5. that wholesale electric prices are likely to remain weak relative to other regions in the country given the region's excess supply and the high reliance on nuclear and coal assets; 6. the asset coverage which is provided by the collateral; 7. reduced refinancing risk, as debt maturities for Midwest Generation are to be extended for seven years; and 8. the potential for additional environmental expenditures.

Moody's added that Midwest Generation's ratings reflect the long-term competitiveness of its 5,621 megawatt fleet of coal-fired assets and the attractive cost position of these assets relative to natural-gas fired plants. Moody's said it believes that Midwest Generation's competitive position will be maintained over the next several years due to the current and expected intermediate term price of natural gas.

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