Moody's cuts AES Red Oak bonds

Moody's Investors Service said it has downgraded the rating on AES Red Oak's $347 million of senior secured bonds outstanding to B2 from B1 and revised the outlook to stable from negative.

The downgrade reflects the company's limited financial flexibility and liquidity constraints, notwithstanding the high degree of cash flow stability provided by its tolling agreement, the agency added.

The company's tenuous financial condition is largely the result of significant penalties assessed on the plant due to its continuing inability to meet the aggressive heat rate and dispatchable capacity guarantees in the tolling agreement, the agency said.

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