Moody's rates TerraForm loans Ba3

Moody's Investors Service said it assigned a Ba3 corporate family rating, a Ba3-PD probability of default rating and an SGL-2 speculative grade liquidity rating to TerraForm Power Operating LLC and Ba3 (LGD4, 50%) ratings to TerraForm Power Operating's proposed senior secured facilities, comprising of a $300 million term loan B and a $125 million revolving credit facility. The outlook is stable.

The borrower is a subsidiary of TerraForm Power Inc., which in turn is fully owned by SunEdison Inc. The completion of SunEdison’s initial public offering will be a condition precedent to drawing down the term loan.

The agency said the Ba3 rating on TerraForm Power Operating is underpinned chiefly by Moody’s expectations for stable distributions arising from a low business risk asset portfolio and an attractive industry environment for solar projects.

In Moody’s view, the rating is constrained by the significantly weaker credit quality of SunEdison, leverage of about 6 times consolidated debt to EBITDA and the lack of an operating track record combined with a YieldCo business model that has a number of credit-negative attributes: high distribution payouts and expected payout growth, financing risk, acquisition event risk and potential corporate governance conflicts.

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