Research Update: Kestrel Acquisition LLC Senior Debt Rating Raised To 'BB' On Smaller-Than-Expected Upsize; Outlook Stable

Kestrel Acquisition LLC, the owner of the Hunterstown power plant in Pennsylvania, has upsized its term loan B by $50 million,which is significantly less than the $150 million upsizing we had expected. On Nov. 30, 2018, we raised our rating on the project's senior secured debt to 'BB' from 'BB-' given the reduction in forward-looking leverage, which supports higher debt service coverage ratios (DSCRs). The recovery rating of '1' on the $450 million senior secured term loan B and $40 million revolving credit facility remains unchanged, indicating our expectation for very high recovery for lenders (90%-100%; rounded estimate: 95%) in a default. The outlook is stable and reflects our view that the project's capacity factor will remain at around 75%-80%,

...+ Kestrel Acquisition LLC, the owner of the Hunterstown power plant in Pennsylvania, has upsized its term loan B by $50 million,which is significantly less than the $150 million upsizing we had expected. + On Nov. 30, 2018, we raised our rating on the project's senior secured debt to '##' from '##-' given the reduction in forward-looking leverage, which supports higher debt service coverage ratios (DSCRs). + The recovery rating of '1' on the $450 million senior secured term loan B and $40 million revolving credit facility remains unchanged, indicating our expectation for very high recovery for lenders (90%-100%; rounded estimate: 95%) in a default. + The outlook is stable and reflects our view that the project's capacity factor will remain at around 75%-80%, with spark spreads in the $12-$16 per megawatt hour (MWh) range. DSCRs over the life of the project remain above 2x. We expect the project to sweep a significant amount of debt over the next few years....

Research Update