Fitch places Talen on negative watch

Fitch Ratings said it placed the CCC+ long-term issuer default rating of Talen Energy Supply, LLC on rating watch negative. The agency also placed the ratings of the senior secured debt at B+/RR1 and the senior unsecured notes at CCC+/RR4 on rating watch negative.

“The rating action follows a significant decline in available liquidity at Talen due to a requirement to post higher amounts of cash collateral in response to a run up in forward power prices and based on the company's hedge position,” Fitch said in a press release.

The agency noted Talen has secured a $788 million first-lien financing commitment from GoldenTree Asset management and Silver Point Finance but the closing by mid-December is subject to approval by the revolver bank group and final documentation.

An inability to secure the new financing would significantly hurt the company leading to heightened probability of default, Fitch cautioned.

“While the new financing, once executed, will stabilize the liquidity profile of Talen, the ratings of the existing debt issuances will be adversely affected,” the agency said.

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