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S&P rates Hawkeye Renewables loan B
Standard & Poor's said it assigned its B rating to Hawkeye Renewables LLC's $185 million senior secured credit facility due in 2012. The outlook is stable. S&P also assigned its 3 recovery rating to the loan.
S&P said the B rating on the notes reflects exposure to volatile commodity prices on the revenue and cost sides of the margin equation, significant risk of an overbuild scenario in the next few years that could depress ethanol prices, significant refinancing risk, construction risk for the planned capacity expansion at Iowa Falls, Iowa and the new facility at Fairbank, Iowa and structural subordination of the bonds to the $10 million working capital credit facility.
These risks are somewhat mitigated by default risk due to commodity price fluctuations is reduced by the project's debt structure, refinancing risk is reduced through the 40% cash sweep mechanism that requires the project to use at least 40% of the excess cash flow each year to pay down senior debt and construction risk is reduced through the fixed-price EPC contract with Fagen Inc.
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