Moody's downgrades Kestrel

Moody's Investors Service said it downgraded the rating assigned to Kestrel Acquisition, LLC's credit facilities to B1 from Ba3 following a planned $150 million increase to the term loan B amount.

The outlook is stable.

After the incremental debt, Kestrel's senior secured credit facilities will consist of a $550 million term loan B due 2025 and $40 million revolving credit facility due 2023.

The proceeds from the incremental debt will be used to pay a special dividend to Platinum Equity, Kestrel's owner, Moody's said.

The one-notch downgrade reflects the meaningful increase in leverage on a sustained basis resulting in weakened financial metrics for a longer period and higher refinancing risk, the agency said.

The payment of a large dividend eliminates the cash equity that Platinum has invested in Kestrel, Moody's said, and lessens the economic incentive to support its investment if the project encounters financial difficulties.

The downgrades also consider several positive developments that should increase cash flow, including a higher-than-anticipated capacity auction result for auction year 2022 to 2023, the agency said.

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