S&P downgrades Homer City, debt

S&P said it lowered its corporate credit rating on Homer City Generation LP to CCC- from B- and removed the rating from CreditWatch negative, where it was placed on Feb. 17.

The outlook is negative.

The agency also lowered the senior secured debt rating to CCC from B+ and revised the recovery rating on the senior secured debt to 2 from 1. The 2 rating indicates expectations for substantial (70-90%; upper half of the range) recovery if a default occurs).

S&P said the actions on Homer City stems from several factors that resulted in deteriorating credit quality.

Cash on hand decreased to $25 million on Dec. 31, 2015, from $103 million on Sept. 30, 2015, resulting in a severely diminished liquidity position. The company will likely incur a significant cash flow deficit in light of weak power prices in the PJM Interconnection market, and S&P said it believes a default, distressed exchange or redemption is inevitable within the next six months.

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