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Fitch trims Talen
Fitch Ratings said it trimmed Talen Energy Supply, LLC’s long-term issuer default rating by one notch to B- from B and revised the outlook to negative from stable.
Concurrently, Fitch lowered Talen's senior secured debt to BB-/RR1 from BB/RR1 and the senior unsecured notes including the outstanding $100 million Pennsylvania Economic Development Financing Authority series 2009A bonds to B-/RR4 from B/RR4. RRR1 indicates outstanding recovery in the range of 91%-100% and RR4 indicates average recovery in the range of 31%-50% in the event of default.
“The downgrade of Talen's IDR reflects the hit to its profitability and FCF profile following the disappointing 2022/2023 PJM capacity auction results and the diminished likelihood of meaningful equity support to right size the highly leveraged capital structure. Fitch expects Talen's recourse debt/EBITDA to be between 7.1x and 7.6x and FFO fixed-charge coverage to be between 1.5x and 1.8x over 2021-2023, well outside the negative rating sensitivities of 7x and 2x, respectively,” Fitch said in a press release.
The new outlook mirrors the continued uncertainty around future auctions, weak recovery in power demand and Talen's constrained access to capital, the agency said.
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