S&P ups Calpine Construction to B

Standard & Poor's said it raised the corporate credit rating on Calpine Construction Finance Co. LP to B from CCC-.

The agency raised the rating on the $369 million first-priority senior secured institutional term loans and $411 million second-priority senior secured floating rate notes to BB- from CCC+. The 1 recovery rating on both tranches of debt remains unchanged, indicating 90% to 100% recovery.

The outlook is stable.

According to S&P, the upgrade follows a full review of assets and the related contracts and the emergence of Calpine Corp. (B corporate credit rating) from bankruptcy.

Concerns include revenue from volatile merchant sales and absence of a debt service reserve or cash traps to preserve liquidity and cushion revenue volatility, the agency said.

Strong market conditions and cash flows, absence of liquidity risks on fuel purchases and geographically diversified portfolio help mitigate the risks, S&P noted.

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