Moody's rates AES notes B1

Moody's Investors Service said it assigned a B1 rating (LGD4, 56%) to AES Corp.'s proposed $600 million senior unsecured notes due 2020.

The agency affirmed its corporate family and probability-of-default ratings at B1, senior secured credit facilities at Ba1 (LGD1, 5% from 2%), second priority senior secured notes at Ba3 (LGD3, 41% from 38%), senior unsecured notes at B1 (LGD4, 56% from 53%) and trust preferred securities at B3 (LGD6, 95% from 94%).

The outlook is stable.

The affirmation reflects an expectation that AES will use the proceeds from the proposed offering to refinance a similar amount of recourse debt, Moody's said. The affirmation also considers the company's effort to eliminate the financial covenants contained in its second priority senior secured notes.

Ratings consider the company's high leverage and the structural subordination of its recourse debt to the significant level of non-recourse debt in its consolidated capital structure, the agency said.

Constraints are somewhat mitigated by the diversification provided by AES's large number of subsidiaries, their wide geographic distribution and balanced fuel mix, and the significant proportion of the company's cash flow subject to stable regulation or long-term contracts, Moody's said.

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