S&P downgrades GenOn

S&P said it lowered the corporate credit rating on GenOn Energy Inc. and its affiliates GenOn Energy Holdings Inc., GenOn Americas LLC and GenOn REMA LLC to CCC from CCC+.

The outlook is negative.

The agency also said it lowered the ratings on GenOn Energy Inc.’s $1.95 billion senior unsecured notes to CCC+ from B-.

The recovery rating on this debt remains at 2, indicating 70% to 90% expected default recovery.

S&P also said it lowered the rating on GenOn REMA’s $641 million pass-through certificates to B- from B. The recovery rating on this debt remains at 1, indicating 90% to 100% expected default recovery.

The agency also said it lowered the rating on GenOn Americas’s $850 million unsecured notes to CCC from CCC+. The recovery rating on this debt remains at 3, indicating 50% to 70% expected default recovery.

S&P also said it raised the rating on GenOn Mid-Atlantic LLC’s $770 million of pass-through certificates to B- from CCC+ and revised the recovery rating to 1 from 3.

This revision follows a reassessment of the priority of the pass-through certificates relative to other GenOn Mid-Atlantic obligations and the determination that their priority would remain senior under all default scenarios, the agency said.

GenOn’s credit profile has weakened following a progressively weaker forward power curve due to depressed natural gas prices, S&P said, and lower gross margins due to stagnating demand and milder weather patterns.

The agency said it believes a distressed exchange is increasingly likely.

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