S&P turns Kestrel outlook to stable

S&P said it changed its outlook for Kestrel Acquisition LLC to stable from negative and affirmed the B rating. The 2 recovery rating (70%-90%) is unchanged, though it revised the rounded recovery estimate to 80% from 70%.

The agency said it updated its forecast for Kestrel to account for its lower debt balances and higher cash flows based on a forecast for improved spark spreads over the next two years.

S&P noted Kestrel swept $48 million in 2023 topping the agency’s forecast and shaving its debt at maturity to $350 million down from the previous projection of $375 million.

“The stable outlook reflects our expectation for improved spark spreads and energy margins in the near term, as well as some additional debt paydown via cash flow sweeps. We expect the project's debt service coverage ratios (DSCRs) will exceed 1.25x through the asset's life (including the refinancing period) and anticipate there will be about $350 million of debt outstanding on its term loan at maturity in mid-2025,” S&P said in a statement.

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