Research Update: Kestrel Acquisition LLC Senior Secured Debt Rating Lowered To 'BB-' On Debt-Funded Dividend; Outlook Stable

Kestrel Acquisition LLC, the owner of the Hunterstown power plant in Pennsylvania, is upsizing its term loan B by $150 million to fund a one-time distribution of $145 million to its sponsors and pay transaction fees and expenses. We expect the asset to achieve a capacity factor of about 75%-80% and are now recognizing some incremental cash flow in our forecast from the project's gas optimization plan, which stems from its its ability to buy and sell gas at different points along the TETCO pipeline to monetize spreads. We are, however, lowering our rating on the project's debt to 'BB-' from 'BB' given the increased debt and lower debt service coverage ratios (DSCRs). The recovery rating of '1' on the

...+ Kestrel Acquisition LLC, the owner of the Hunterstown power plant in Pennsylvania, is upsizing its term loan B by $150 million to fund a one-time distribution of $145 million to its sponsors and pay transaction fees and expenses. + We expect the asset to achieve a capacity factor of about 75%-80% and are now recognizing some incremental cash flow in our forecast from the project's gas optimization plan, which stems from its its ability to buy and sell gas at different points along the TETCO pipeline to monetize spreads. + We are, however, lowering our rating on the project's debt to '##-' from '##' given the increased debt and lower debt service coverage ratios (DSCRs). The recovery rating of '1' on the $550 million senior secured term loan B and $40 million revolving credit facility remain unchanged. + The stable outlook reflects our view that the project's capacity factors will remain at around 75%-80%, with spark spreads at $12-$16 per megawatt hour (MWh). The minimum DSCR over the...

Research Update