S&P rates Cedar Bay loan BB

Standard & Poor's said it assigned BB preliminary rating to Cedar Bay Generating Co. LP's $250 million senior secured first-lien term loan B facility due 2020.

The outlook is stable.

The recovery rating is a preliminary 1, indicating 90% to 100% expected default recovery.

The ratings consider the project's unfavorable energy margin, S&P said. Although project operations have been good during the past three years, the project has experienced periods of high effective forced outage rate in earlier years, the agency said, and there is a risk that either availability will be lower than projected or that operating and major maintenance expenses will be higher than expected.

The ratings also reflect that much of the value in the plant is embedded in the long-term power purchase agreement, but the project will not likely be able to renegotiate this contract to remove the basis differential, S&P said.

The stable outlook reflects a view that Cedar Bay's negative energy margin will not widen further than seen during the past five years in the near term, the agency said.

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