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S&P downgrades GenOn, debt
S&P said it lowered its corporate credit ratings on GenOn Energy Inc. and its affiliates, GenOn Energy Holdings Inc., GenOn Americas LLC, GenOn Mid-Atlantic LLC and GenOn REMA LLC, to CCC- from CCC.
The outlook is negative.
At the same time, the agency downgraded its issue-level rating on GenOn Energy's senior unsecured debt to CCC from CCC+. The recovery rating remains 2, reflecting an expectation of substantial (70%-90%; lower half of the range) recovery in the event of default.
S&P also lowered its issue-level rating on GenOn Americas’ senior unsecured debt to CCC- from CCC. The recovery rating is 3, reflecting an expectation of meaningful (50%-70%; higher end of the range) recovery in the event of default.
In addition, S&P downgraded its issue-level rating on GenOn Mid-Atlantic’s and GenOn REMA’s senior secured debt to CCC+ from B-. The recovery rating is 1, reflecting an expectation of very high (90%-100%) recovery in the event of default.
"The negative outlook reflects the continuing pressure on financial measures. And, while we did not expect a default in 2016 because of significant cash balances, it reflects the prospects that GenOn might consider distressed exchange offers over the next six months," S&P credit analyst Aneesh Prabhu said in a news release.
"The negative outlook also factors in the $690 million maturity in June 2017, which puts pressure on the company to restructure. Even absent a restructuring or distressed exchange, we anticipate that within the next six months the issuer could face an inevitable default in the form of an inability to refinance 2018 maturities, which would be commensurate with a CC rating."
Consistent with its criteria, the agency said it sees the probability of a downgrade to CC as likely by midyear because it sees increasing probability of the company defaulting before, or by, June 2017, when it faces a large refinancing.
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