S&P assigns BB to Frontera loans

S&P said it assigned its BB issue-level rating and 1 recovery rating to Frontera Generation Holdings LLC's $700 million senior secured term loan B due in 2025 and $35 million revolving credit facility due in 2023.

The 1 recovery rating indicates an expectation of very high recovery (90%-100%; rounded estimate: 95%) in the event of a default.

The outlook is stable.

Frontera is the only U.S. power plant that sells all its power into Mexico, via a 230-kilovolt transmission line. As such, Frontera enjoys a significant competitive advantage but also has exposure to unique risks, S&P said.

“The stable outlook reflects a 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,” the agency said in a news release.

“We expect the project to deleverage materially via a cash flow sweep beginning at 100% with the first scheduled sweep date in January 2019.”

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