S&P rates Astoria Energy loan B+

Standard & Poor's said it assigned its final B+ rating on Astoria Energy LLC's $500 million first-lien senior secured bank loan due March 2012.

The rating follows the recent restructuring of the project's original $690 million offering to include a $500 million first-lien tranche and a $200 million second lien tranche. The second-lien tranche is unrated.

The outlook is stable.

S&P has assigned a recovery rating of 2 to the first-lien bank debt to indicate the substantial recovery (80% to 100% of principal) that secured lenders may expect in the event of a default.

S&P said the rating reflects the fact that, although first-lien holders enjoy an improved security position relative to the original structure, the default risk of the project remains substantially the same. The higher all-in interest rate of the restructured deal partially offsets the benefit of the additional security to first-lien holders.

Higher pricing than S&P originally anticipated has increased the refinancing risk lenders bear and weakens the project's financial performance during low-price periods. The coterminus maturity dates of the two debt tranches also raise the risk that in bankruptcy some second-lien holders could share in recovery because the same collateral secures both tranches.

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