Fitch trims Talen

Fitch Ratings said it lowered Talen Energy Supply, LLC’s long-term issuer default rating by one notch to CCC+ from B-. Concurrently, Fitch trimmed Talen's senior secured debt to B+/RR1 from BB-/RR1 and the senior unsecured notes, including the outstanding $100 million of Pennsylvania Economic Development Financing Authority series A bonds, to CCC+/RR4 from B-/RR4. The RR1 recovery rating indicates outstanding recovery and the RR4 indicates average recovery in default.

“The downgrade of Talen's IDR reflects the company's preference to capitalize the growth businesses at the asset level rather than at the holding company level, which, in Fitch's view, has significantly diminished the likelihood of any equity support to right size the highly leverage capital structure. With forecasted leverage, as measured by recourse debt to EBITDA, averaging 7.2x and FFO fixed-charge coverage averaging 1.7x over 2021-2023, Fitch views the current capital structure as untenable,” Fitch said in a press release.

In its second-quarter earnings call, Talen’s management indicated it has been evaluating liability management proposals from creditor groups.

The outlook remains negative.

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