S&P ups Cordova bonds, view to positive

Standard & Poor's said it raised its rating on Cordova Funding Corp.'s (CFC) $225 million series A senior secured bonds due 2019 to B from B-.

The outlook was also revised to positive from stable.

CFC is the funding vehicle that issued debt and subsequently loaned the proceeds to its affiliate, Cordova Energy Co. LLC, which guarantees CFC's payment obligations.

The upgrade reflects a recent similar action on El Paso Corp., which is the guarantor of the obligations of Cordova's primary power offtaker, El Paso Merchant Energy Co., under a tolling agreement that expires in 2019.

In addition to the exposure to El Paso, the rating reflects the risks that include counterparty risks, plant performance must exceed 95.6% availability to receive 100% of the guaranteed payment from El Paso and the domination of low-cost, coal-based generation in the Mid-American Interconnected Network.

These risks are offset, S&P said, by the estimate that guaranteed tolling payments under the 20-year power-purchase agreement cover 90% to 100% of the project's debt service and fixed costs under zero dispatch, provided the project qualifies for 100% of these payments and a security interest in the mortgage.

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