S&P rates Lackawanna Energy loans BB-

S&P said it assigned BB- issue and 2 recovery ratings to Lackawanna Energy Center LLC’s $730 million term loan B, $82 million term loan C, and $120 million revolving credit facility. The 2 recovery rating indicates substantial (70%-90%; rounded estimate: 75%) recovery in a default scenario. The outlook is stable.

The term loan B facility is split into a $350 million TLB-1 tranche and $380 million floating rate TLB-2 tranche.

“LEC operates under a gas netback agreement (GNA) with the South Jersey Research Group (SJR) that provides up to 210,000 dekatherms per day under a firm supply agreement through December 2029. We consider this type of hedge to be credit supportive because it provides a degree of margin protection against falling power prices,” S&P said in a press release.

The issuer used the proceeds to refinance debt that was used to fund the construction and initial operations of the project and to pay transaction-related expenses.

“The stable outlook reflects our expectation that LEC would generate at least a minimum DSCR of 1.39x through the project's life, which includes the post-refinancing period (2028-2043). Based on our view of the current market environment, we project the total TLB balance of about $460 million at maturity in 2029,” S&P said.

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