Moody's cuts American Ref-Fuel notes to Ba1

Moody's Investors Service said it downgraded the rating of American Ref-Fuel Co. LLC's senior secured notes to Ba1 from Baa2.

Moody's also downgraded the senior secured notes of MSW Energy Holdings LLC and MSW Energy Finance Co., Inc. to Ba3 from Ba1 and downgraded the senior secured notes of MSW Energy Holdings II LLC and MSW Energy Finance II Co., Inc. to Ba3 from Ba2.

Also downgraded are $43.5 million of resource recovery bonds issued by the Connecticut Resources Recovery Authority to Ba2 from Baa2 and $172.4 million of bonds issued by the Delaware Valley Industrial Development Authority to Ba2 from Baa3, for which American Ref-Fuel is the underlying obligor. The outlook is stable.

Moody's said the rating actions reflect the pending acquisition of American Ref-Fuel Holdings Corp. by Covanta Energy Corp. for $740 million in cash plus the assumption of debt.

The downgrade of the ratings considers their acquisition by a more leveraged parent company and the substantial difference in credit quality between these three subsidiaries and the new owner, Moody's added.

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