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S&P lowers Drax Power, rates loan BB+
Standard & Poor's said it lowered the long-term corporate credit rating on Drax Power Ltd. to BB from BB+.
The outlook is stable.
The agency also said it withdrew the BBB- rating on Drax's £310 million revolving credit facility to reflect its replacement with a new £400 million facility.
The agency said it assigned a BB+ rating to Drax's new £400 million revolving credit facility. The recovery rating is 2, indicating 70% to 90% expected default recovery.
S&P also assigned a rating of BB+ to Drax's £100 million term loan with the Prudential/M&G UK Cos. Financing Fund and its £100 million term loan with the UK Green Investment Bank. The recovery rating on these two term loans is 2, indicating 70% to 90% expected default recovery.
The downgrade reflects an expectation that Drax's credit metrics will weaken as a result of the debt issuance, the agency said.
The increase in financial risk as a result of the debt issuance may not be offset by a commensurate reduction in business risk in the near term, S&P said.
The company has a weak business risk profile, considering Drax's inherently risky merchant business model and resulting exposure to wholesale electricity prices, S&P said.
The ratings also reflect its important position in the U.K. power markets, efficient and flexible power turbines and good operational track record, the agency said.
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