S&P lowers Illinois Power to negative

S&P said it revised the outlook on Illinois Power Generating Co. to negative from stable.

The agency also said it affirmed the CCC+ corporate credit rating and CCC+ ratings on the senior unsecured debt.

S&P also said it revised the recovery rating on the unsecured debt to 4 from 3. The 4 recovery rating indicates 30% to 50% expected default recovery.

The outlook revision stems from an expectation that Illinois Power would transition into the CCC category if it is unable to refinance its $300 million 2018 maturity, the agency said.

While a CCC+ rating can apply to any company with an unsustainable capital structure or one that relies on favorable developments to avoid default, a CCC rating generally applies to those companies that are likely to default within one year, S&P explained.

While that doesn’t seem applicable now, the outlook signals that it could be true within a year or 18 months, the agency said.

Given the severe challenges facing coal-fired generation in much of the United States in a weak commodity-pricing environment, S&P said it believes the company will face extreme difficulty refinancing this maturity at favorable terms.

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