PrefBlog

Standard & Poor’s has announced:

• U.S. electric power developer Atlantic Power Corp.’s key credit measures have deteriorated due to the sale of a number of assets, the timing and return of investment capital, slower growth assumptions, and lower expectations for EBITDA contributions at a number of the company’s power plants. We expect that the 2013 debt service coverage ratio (DSCR) will be about 1.3x to 1.4x.
• We are lowering the corporate credit rating on Atlantic Power to ‘B’ from ‘BB-‘. We are also lowering our issue ratings for the debt and preferred stock of the company and its various subsidiaries and revising the recovery ratings.. We are removing the ratings from CreditWatch, where we placed them with negative implications on May 16, 2013.
• The stable outlook reflects our belief that Atlantic Power will obtain a waiver to potential covenant violations by amending the credit facility. The company has cash-on-hand to manage its operations for about a year even under a hypothetical termination of its revolving credit facility. It also reflects Atlantic Power’s mostly contracted portfolio, and our expectations that cash available for debt service (CFADs) to debt and CFADs to interest coverage will be about 10% to 12% and 1.5x, respectively, and liquidity will be adequate.

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The financial risk profile has increased to “highly leveraged” from “significant” to reflect an increase in consolidated leverage per kilowatt, lower expected project economics at a number of Atlantic Power’s plants and credit measures in line with the ‘B’ rating.
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The stable outlook reflects our belief that Atlantic Power will resolve its financial covenant issue in a reasonable manner in the coming weeks. It also reflects Atlantic Power’s mostly contracted portfolio, and our expectations that CFADs to debt and CFADs to interest coverage will be about 10% to 12% and 1.5x, respectively, and liquidity will be adequate. We could raise the rating if growth projects increase EBITDA significantly or CFADS to debt and CFADS to interest ratios improve to around 15% and 2.0 to 2.2x. We could lower the rating if generation is lower than expected, maintenance costs are higher, or if growth targets are not met. We could also lower the rating if we determine that there is risk in the refinancing of Atlantic Power’s Curtis Palmer notes.

PrefBlog previously reported the S&P CreditWatch Negative. The company is also under Review-Negative by DBRS, which has not yet been resolved.

This entry was posted on Sunday, July 7th, 2013 at 12:14 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.