S&P affirms Frontera loans

S&P said it affirmed its BB issue-level rating on Frontera Generation Holdings LLC's $775 million senior secured term loan B due in 2025 and $35 million revolving credit facility due in 2023.

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

The outlook is stable.

“We have revised our expectations for cash flow generation from the Mexican energy market upward to reflect an improved load growth forecast and consequently higher expected spark spreads,” S&P said in a news release.

“Frontera outperformed our expectation with last-12-months EBITDA of $163 million (about $30 million higher than expected) and year-to-date 2018 realized spark spreads of about $50/Mwh as of Sept. 30, 2018.

“While we do not believe a $45/Mwh spark spread will persist throughout the life of the asset, we now expect spark spreads in the $30/Mwh range consistently.”

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