Moody's lowers Homer City bonds

Moody's Investors Service said it downgraded Homer City Funding LLC's pass-through bonds to Caa1 from B2.

The outlook remains negative.

Moody's said the downgrade reflects its assumption of Homer City's likely prepackaged bankruptcy filing to effectuate a restructuring of its debt obligations as described in its May 8-K filing.

The debt restructuring at Homer City is expected to involve a deferral of scheduled principal payments and conversion of cash pay interest into pay-in-kind from October 1, 2012 through and including April 1, 2014, the agency said.

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