S&P downgrades Illinois Power

S&P said it lowered the corporate credit and senior unsecured debt ratings on Illinois Power Generating Co. to CC from CCC+.

The recovery rating on the senior unsecured debt remains at 4, reflecting less than 40% recovery under the exchange plan.

The outlook is negative.

The rating reflects Illinois Power and Illinois Power Holdings LLC’s announced intention to undertake a debt exchange consider distressed, S&P said.

The plan is to complete an exchange through an out-of-court process if more than 97% of lenders agree to terms or through a pre-packaged bankruptcy if less than 97% accept the offer, the agency said.

Weak prospects for cash flow from the companies’ coal units due to weak merchant power prices, along with significant capital expenditure needs starting in 2018, make it highly unlikely that Illinois Power could refinance its 2018 maturity of $300 million.

The negative outlook indicates a high likelihood that the companies will complete a debt exchange soon either through an out-of-court exchange or a pre-packaged bankruptcy process, S&P said.

In the case of any distressed restructuring, the agency said it will lower Illinois Power’s corporate credit rating to SD and lower the senior unsecured debt issue ratings to D.

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