CZP: DBRS Announces Review-Negative

DBRS has announced that it:

has today placed the BBB (high) Senior Unsecured Debt & Medium-Term Notes rating of Capital Power Income L.P. (the Partnership or CPILP) and the Pfd-3 Cumulative Preferred Shares rating of CPI Preferred Equity Ltd. Under Review with Negative Implications. The rating action follows the joint announcement by CPILP and Capital Power Corporation (CPC) that CPILP will initiate a process to review its strategic alternatives. CPC’s subsidiary, Capital Power L.P. (CPLP, rated BBB with a Stable trend) is the 30% indirect owner and manager of CPILP.

The decision is the result of strategic review processes, undertaken by each of a Special Committee of CPILP Independent Directors and CPC, to explore alternatives for maximizing value for both CPILP unitholders and CPC shareholders. CPC has advised the Special Committee that it will support the review of strategic alternatives and that if the process results in a determination to proceed with a sale of the Partnership, CPC (and, therefore, CPLP) does not intend to participate as a prospective buyer. The process is anticipated to take place over the next several months.

Although the announcement of a strategic review process most typically results in an Under Review with Developing Implications action, DBRS has placed CPILP’s ratings Under Review with Negative Implications to reflect both the strategic review announcement and the Negative trends on CPILP’s ratings prior to today’s rating action. DBRS continues to monitor the Partnership’s financial performance and the final decision of the North Carolina arbitration on the power purchase agreements (PPAs). Clarification on these items during the Under Review with Negative Implications period, if viewed as positive for CPILP’s credit quality, could result in a change of the Under Review status from Negative to Developing.

CZP.PR.A is a ticker change from the original EPP.PR.A. This issue had a rough underwriting, and is a Straight Perpetual with a 4.85% coupon.

CZP.PR.B, originally EPP.PR.B, had a more successful underwriting and is a FixedReset, 7.00%+418. It was removed from TXPR in July 2010.

Both issues are tracked by HIMIPref™ but are relegated to the Scraps index on credit concerns.

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