Moody’s downgrades Lonestar II

Moody’s Investors Service said it downgraded Lonestar II Generation Holdings LLC’s senior secured debt to B1 from Ba3.

“The downgrade of the senior secured ratings to B1 was prompted by weak financial performance in the first nine months of 2020 as a result of muted Electric Reliability Council of Texas (ERCOT) market prices as well as Moody’s expectation of reduced future excess cash flow generation owing to lower ERCOT forward power prices and the potential for a higher future reserve margins of 15.5% in 2021 and up to 20-25% in 2022-2025,” the agency said in a press release.

The affected debt includes the $310 million ($306.4 million outstanding) guaranteed senior secured term loan B due 2026, the $37.2 million guaranteed senior secured term loan C due 2026 and the $20 million guaranteed revolving credit facility due 2024. Moody’s also changed the outlook to negative from stable.

The outlook reflects the limited visibility for substantial excess cash flow generation, leading to meaningful debt reduction over the next 12-18 months, the agency said.

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