S&P cuts Sithe/Independence bonds to junk

Standard & Poor's said it lowered its rating on Sithe Independence Funding Corp.'s $559.5 million senior secured bonds to B from BBB- and removed the rating from CreditWatch negative. The outlook is negative.

S&P said the downgrade follows Dynegy Inc.'s (B/negative/--) purchase of 100% ownership of Sithe Energies Inc. Sithe Energies is the 100% owner of Sithe Independence Power Partners LP, which in turn owns 100% of Sithe Independence Funding and unconditionally guarantees the project debt.

Under the base case scenario, allowing for fixed payments from Dynegy under the tolling and swap agreements, the debt service coverage ratio averages 1.7x and the minimum coverage is 1.5x occurring in 2005, according to S&P.

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