S&P cuts TPF II LC rating to 'B-' from 'B+'May 3 - Overview
-- U.S. electricity generator TPF II LC LLC's cash flow from operations
may be insufficient to cover debt service beginning in the second half of
2012, given current weak merchant markets and the drop in PJM capacity prices
that begins in June.
-- In the project management's base-case assumptions, the project will
draw on the debt service reserve in the second half of the year.
-- As capacity prices are fixed and will continue to be low in 2013, our
projections suggest that the project will exhaust cash on hand and need to tap
its debt service reserve to cover mandatory debt service.
-- We are lowering our rating on the project to 'B-' from 'B+'.
-- The negative outlook reflects our view that absent equity cures or
other measures the project will likely experience a covenant default in the
first half of 2013.
Rating Action
On May 3, 2012, Standard & Poor's Ratings Services lowered its rating on TPF
II LC LLC's $205 million in first-lien facilities to 'B-' from 'B+'. The
facilities consist of a $165 million seven-year senior secured term loan
($74.5 million outstanding as of Dec. 31, 2011) and a $40 million revolving
facility, both of which mature in 2014. The recovery rating on the secured
facilities is '1', indicating our expectation of very high (90% to 100%)
recovery of principal in the event of default. The rating outlook is negative.
