Research Update: Kestrel Acquisition LLC Debt Rating Lowered To 'B+' On Lower Debt Service Coverage Ratios

Because of financial underperformance in 2019 and lower projected power prices in 2020 and beyond, Kestrel Acquisition LLC (Kestrel), the owner of the Hunterstown Generating Station (Hunterstown), will now generate less cash than we previously anticipated. We revised our forecast to reflect higher debt balances and lower expected cash flows in future periods, which has resulted in lower debt service coverage ratios (DSCRs) throughout the life of the plant and increased refinancing risk. We are lowering our senior secured debt rating on Kestrel to 'B+' from 'BB-', based on lower DSCRs. Our '2' recovery rating is unchanged. We are revising the rating outlook to stable from negative. The stable outlook incorporates our view that the project's recent decline in projected

...Because of financial underperformance in 2019 and lower projected power prices in 2020 and beyond, Kestrel Acquisition LLC (Kestrel), the owner of the Hunterstown Generating Station (Hunterstown), will now generate less cash than we previously anticipated. - We revised our forecast to reflect higher debt balances and lower expected cash flows in future periods, which has resulted in lower debt service coverage ratios (DSCRs) throughout the life of the plant and increased refinancing risk. - We are lowering our senior secured debt rating on Kestrel to 'B+' from '##-', based on lower DSCRs. Our '2' recovery rating is unchanged. - We are revising the rating outlook to stable from negative. The stable outlook incorporates our view that the project's recent decline in projected cash flow available for debt service is unlikely to materially deteriorate further and we expect DSCRS to be above 1.35x in all years....

Research Update