Moody's rates USPF loans Ba2

Moody's Investors Service said it assigned a Ba2 rating to the senior secured credit facilities to be issued by USPF Holdings, LLC, which is a special purpose entity formed by United States Power Fund, LP, an Energy Investors Funds managed fund, to hold interests in a portfolio of eight projects. The credit facilities include a $288 million senior secured term loan facility due 2014 and a $12 million senior secured prefunded letter-of-credit facility due 2014.

The outlook is stable.

Proceeds from the transaction will be used to finance a distribution to USPF; pay related transaction costs; fund the $12 million prefunded letter-of-credit facility, which supports a six-month debt service reserve; and fund a $5 million liquidity reserve.

The agency said the Ba2 rating considers the cash flow stability and predictability provided by USPF Holdings' long-term power purchase agreements; the fact that contracted cash flows alone are capable of meeting the required debt service for the credit facility; a portfolio characterized by diversity of location and cash flows; merchant and recontracted cash flows provide incremental support to contracted cash flows; and the company has a highly experienced and proven management team.

Areas of credit concern are a high degree of leverage in the underlying project portfolio, the normal operating risk associated with power project assets, refinancing risk, the structurally subordinated position of the lenders to the holding company, in relation to existing debt at six of the projects, and no hard asset security is available to the lenders, Moody's said.

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