S&P rates Frontera loans BB

S&P said it assigned its preliminary BB issue-level ratings to Frontera Generation Holdings LLC's $675 million senior secured term loan B due in 2025 and $35 million revolving credit facility due in 2023.

At the same time, S&P assigned a 1 recovery rating to the senior secured facilities, indicating very high recovery (90%-100%; rounded estimate: 95%) in the event of a default.

The outlook is stable.

“The stable outlook reflects our view that the project will continue to operate at capacity factors above 90%, with spark spreads in the mid-$20/MWh range and minimum DSCRs of at least 1.7x. We expect the project to deleverage materially via a cash flow sweep beginning at 100% at issuance,” S&P said in a news release.

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