Categories

A sample text widget

Etiam pulvinar consectetur dolor sed malesuada. Ut convallis euismod dolor nec pretium. Nunc ut tristique massa.

Nam sodales mi vitae dolor ullamcorper et vulputate enim accumsan. Morbi orci magna, tincidunt vitae molestie nec, molestie at mi. Nulla nulla lorem, suscipit in posuere in, interdum non magna.

Lenders play it safe amid China property woes

Thumbnail

Lenders are expected to stay cautious towards China’s cash-strapped property sector as Shenzhen-based developer Kaisa’s debt woes continue to rattle the market. But they will continue to lend to larger mainland companies.

“Companies from China will remain a major source of business for loan markets this year,” said Sonia Li, head of syndicated loans for Asia at JP Morgan. “But you will see a flight to quality for Chinese borrowers, particularly in light of what is happening in the real estate sector. Lenders will be very cautious to the real estate sector,” she added.

China has become a bigger part of Asia’s loan markets. According to Thomson Reuters data, China was the largest driver for loan growth in the Asia-Pacific region last year, accounting for $141.3 billion in loan volume or about 27% of the total in the region. Infrastructure, project and real estate deals accounted for slightly more than two-thirds of that volume.

Given the increasing exposure banks have to Chinese property, a protracted downturn could have a knock-on effect on the banks. “A lot of mid-sized and big Chinese banks as well as foreign banks have exposure to the China property sector. A big downturn in China real estate market would affect everyone but the mainland banks have the most exposure to the property market,” said Christine Kuo, senior credit officer at Moody’s.

For now, however, the rating agency views Kaisa’s problems as being unique to the company and, at a briefing in Hong Kong on Tuesday, Simon Wong, Moody’s senior credit officer, told reporters that he didn’t think the Shenzhen’s developer’s problems would pose a systemic risk to the sector.

“If the Kaisa case is resolved satisfactorily, such as another developer coming in and potentially buying Kaisa’s assets at fair market value, I think that would also help to ease investors’ concerns,” Wong told reporters.

related

Kaisa given respite but is still in the doghouse Kaisa default triggers broader loan worries Agile woe compounds China’s property problems Cofco Land plans up to $500m placement Loan Week, February 13-18

For now though, investors and lenders are giving the sector a wide berth.

Kaisa had been subject to unexplained bans imposed by the Shenzhen government on the sale of its property projects in Shenzhen. Reports had been circulating that other developers including Fantasia and China Overseas Land & Investment have faced similar bans but the companies have since clarified that the blocked sales are due to administrative procedures by the authorities, and not violations by the companies.

Lenders could also turn wary towards small-cap companies. “China is an important market but we expect more large-cap and higher grade companies this year compared to last year given the concerns over the mid-cap sector,” said Amit Khattar, head of syndicated loans for Asia at Deutsche Bank.

Subordination risk

Kaisa’s problems expose the risks that offshore lenders face. It had initially defaulted on a $51 million loan with HSBC. While it subsequently got a waiver from the British lender, other creditors have frozen some of its onshore bank accounts, and if it came down to a default, onshore lenders would get first dibs on the assets.

Offshore lenders are often subordinated to mainland lenders as the loans are typically issued through offshore holding companies, using the so-called red chip structure.

China’s State Administration of Foreign Exchange (Safe) has made moves to take away some of that subordination risk and, in July last year, relaxed the rules to allow mainland companies to use onshore assets as collateral when raising funds offshore. However, there are restrictions, and Safe has made it clear that the proceeds have to be kept offshore.

“The change in Safe rules means that offshore lenders can get senior secured access to Chinese companies rather than just a red chip structure,” said Khattar. “It is a meaningful development but the number of companies using this has been limited by restrictions over the use of proceeds,” he added.

Lenders have been comfortable lending to offshore holding companies, provided they are perceived to be a strong credit. For example, smartphone company Xiaomi last year tested the market with a debut $1 billion loan, which attracted 29 lenders. Xiaomi is cash rich, with no onshore borrowings.

However, weaker companies are expected to come under more scrutiny now. “Lenders have become more comfortable with loans using offshore holding company structures,” said Deutsche Bank’s Khattar. “But they will be more wary about certain credits,” he added.

This year could be a more challenging one for mainland companies as Taiwanese lenders are keen to keep their exposure to mainland companies down, and could look to diversify to Indian or Southeast Asian companies. “Taiwanese banks were big investors for China loans in the past but they have pretty tight China limits at the moment,” said JP Morgan’s Li.

But amid ongoing market volatility, more companies could start tapping the loan markets as bond yields have risen. “Bond market volatility specially in the high yield market could see more high yield issuers trying to access the loan markets in 2015,” said Khattar.

¬ Haymarket Media Limited. All rights reserved.

Email this Print this Tweet this Send us your tips […]

Flight to safety for lenders amid China property woes

Thumbnail

Lenders are expected to stay cautious towards China’s cash-strapped property sector as Shenzhen-based developer Kaisa’s debt woes continue to rattle the market. But they will continue to lend to larger mainland companies.

“Companies from China will remain a major source of business for loan markets this year,” said Sonia Li, head of syndicated loans for Asia at JP Morgan. “But you will see a flight to quality for Chinese borrowers, particularly in light of what is happening in the real estate sector. Lenders will be very cautious to the real estate sector,” she added.

China has become a bigger part of Asia’s loan markets. According to Thomson Reuters data, China was the largest driver for loan growth in the Asia-Pacific region last year, accounting for $141.3 billion in loan volume or about 27% of the total in the region. Infrastructure, project and real estate deals accounted for slightly more than two-thirds of that volume.

Given the increasing exposure banks have to Chinese property, a protracted downturn could have a knock-on effect on the banks. “A lot of mid-sized and big Chinese banks as well as foreign banks have exposure to the China property sector. A big downturn in China real estate market would affect everyone but the mainland banks have the most exposure to the property market,” said Christine Kuo, senior credit officer at Moody’s.

For now, however, the rating agency views Kaisa’s problems as being unique to the company and, at a briefing in Hong Kong on Tuesday, Simon Wong, Moody’s senior credit officer, told reporters that he didn’t think the Shenzhen’s developer’s problems would pose a systemic risk to the sector.

“If the Kaisa case is resolved satisfactorily, such as another developer coming in and potentially buying Kaisa’s assets at fair market value, I think that would also help to ease investors’ concerns,” Wong told reporters.

related

Kaisa given respite but is still in the doghouse Kaisa default triggers broader loan worries Agile woe compounds China’s property problems Cofco Land plans up to $500m placement Loan Week, February 6-12

For now though, investors and lenders are giving the sector a wide berth.

Kaisa had been subject to unexplained bans imposed by the Shenzhen government on the sale of its property projects in Shenzhen. Reports had been circulating that other developers including Fantasia and China Overseas Land & Investment have faced similar bans but the companies have since clarified that the blocked sales are due to administrative procedures by the authorities, and not violations by the companies.

Lenders could also turn wary towards small-cap companies. “China is an important market but we expect more large-cap and higher grade companies this year compared to last year given the concerns over the mid-cap sector,” said Amit Khattar, head of syndicated loans for Asia at Deutsche Bank.

Subordination risk

Kaisa’s problems expose the risks that offshore lenders face. It had initially defaulted on a $51 million loan with HSBC. While it subsequently got a waiver from the British lender, other creditors have frozen some of its onshore bank accounts, and if it came down to a default, onshore lenders would get first dibs on the assets.

Offshore lenders are often subordinated to mainland lenders as the loans are typically issued through offshore holding companies, using the so-called red chip structure.

China’s State Administration of Foreign Exchange (Safe) has made moves to take away some of that subordination risk and, in July last year, relaxed the rules to allow mainland companies to use onshore assets as collateral when raising funds offshore. However, there are restrictions, and Safe has made it clear that the proceeds have to be kept offshore.

“The change in Safe rules means that offshore lenders can get senior secured access to Chinese companies rather than just a red chip structure,” said Khattar. “It is a meaningful development but the number of companies using this has been limited by restrictions over the use of proceeds,” he added.

Lenders have been comfortable lending to offshore holding companies, provided they are perceived to be a strong credit. For example, smartphone company Xiaomi last year tested the market with a debut $1 billion loan, which attracted 29 lenders. Xiaomi is cash rich, with no onshore borrowings.

However, weaker companies are expected to come under more scrutiny now. “Lenders have become more comfortable with loans using offshore holding company structures,” said Deutsche Bank’s Khattar. “But they will be more wary about certain credits,” he added.

This year could be a more challenging one for mainland companies as Taiwanese lenders are keen to keep their exposure to mainland companies down, and could look to diversify to Indian or Southeast Asian companies. “Taiwanese banks were big investors for China loans in the past but they have pretty tight China limits at the moment,” said JP Morgan’s Li.

But amid ongoing market volatility, more companies could start tapping the loan markets as bond yields have risen. “Bond market volatility specially in the high yield market could see more high yield issuers trying to access the loan markets in 2015,” said Khattar.

¬ Haymarket Media Limited. All rights reserved.

Email this Print this Tweet this Send us your tips […]

Nationalloans.com Gives Cash Advance Loan Borrowers Access to One of the Largest Lender Networks in the Nation

BRIDGEPORT, Conn., Nov. 6, 2013 /PRNewswire-iReach/ — In the world of online lending size does matter. In fact, a large lender network increases borrower choice and typically leads to better terms on loans. Cash advance loans are no different. When borrowers can access one of the largest lender networks in the nation at http://www.nationalloans.com/cash-advance.html, they can find the loan products they need with rates and terms they can afford.

(Photo: http://photos.prnewswire.com/prnh/20131106/MN10641)

“We’re not a lender,” states CEO, James Shank. “Instead we help potential borrowers find the lenders that have the loan products they need and can qualify for.” Nationalloans.com offers a variety of lenders and loans their users can access. Lenders who provide personal loans (short- and long-term, secured and unsecured), small business loans, auto loans, bad credit loans, and of course cash advance and payday loans.

“We built our business model on matching borrowers with needs to lenders with products to meet those needs, ” continues Shank. “We make the process easy for borrowers. They can go to one online destination, complete a quick and easy online form, access a huge network of lenders and get multiple loan offers to choose from.”

“Our users do not spend time driving all over town and filling out multiple loan applications. They spend their time reviewing offers and choosing the one with that meets their needs and provides the best terms and rates,” said Shank. “Plus they can compare the offers side-by-side, not just take the first loan they get offered.”

Shank also discussed how the company’s two priorities were to continue growing the lender database and simplifying the application process. “That’s what will give us a competitive advantage in the online marketplace and help us grow our revenue.Tons of online loan sites are popping up everywhere, but most do not offer the experience, credibility, security and lender network of Nationalloans.com. Borrower’s get burned when they choose a fly-by-night company trying to take advantage of a growing demand for loans, but do not have the infrastructure and expertise that years in the business brings you.”

Over the past 15 years, the company has seen a lot of online loan websites come and go, leaving many dissatisfied borrowers behind. “One of our proudest achievements is the fact that we have been around for 15 years and our company keeps getting better and better at what it does and our product offerings keep improving as our lender network grows.

For more information or to apply for a loan, visit http://www.nationalloans.com/.

Media Contact: James Shank, National Loans Inc, (512)571-3828, info@nationalloans.com

News distributed by PR Newswire iReach: https://ireach.prnewswire.com

[…]

Fitch Affirms Terra-Gen Finance Loan Facilities at 'BB-'; Outlook Negative

NEW YORK–(BUSINESS WIRE)–

Fitch Ratings has affirmed the ‘BB-‘ rating on Terra-Gen Finance Company, LLC’s (Terra-Gen) $250 million term loan facility ($194.3 million outstanding) and $60 million working capital facility. Fitch maintains the Negative Outlook on both facilities.

The Negative Outlook reflects the near-term weakness in Terra-Gen’s financial profile that could result in insufficient distributions from the portfolio’s projects.

KEY RATING DRIVERS

Contracted Revenue Base: Revenues are primarily derived from projects with fixed-price power purchase agreements (PPAs) with Southern California Edison (SCE, rated ‘A-‘ with a Stable Outlook by Fitch). Approximately 30% of portfolio capacity is exposed to price volatility under PPAs that derive energy payments through the market-based short-run avoided cost (SRAC) methodology. (Revenue Risk – Price: Midrange)

Adequate Energy Production Forecasts: Energy production forecasts for the wind, solar, and geothermal assets are based largely on actual production data and reasonable assumptions for the technology’s performance. The newer Alta wind projects have yet to establish a track record of stable energy output. (Revenue Risk – Volume: Midrange)

Established Operating History: The portfolio consists of various asset types, which all utilize proven technology. Most projects have an extensive operating history and are operated by a subsidiary of the issuer that Fitch considers capable. (Operation Risk: Midrange)

Subordination and Refinance Risk: The Terra-Gen loan facilities are structurally subordinated to project-level indebtedness. Additionally, the term loan will need to be refinanced in approximately four years. Fixed-price contractual revenues and a cash sweep mechanism to reduce leverage are positive factors indicating that Terra-Gen should be able to refinance the term loan facility. (Debt Structure: Weaker)

Financial Coverage Under Pressure: Due to Terra Gen’s structural subordination, financial performance is considered on a consolidated basis. Terra-Gen’s average consolidated debt service coverage ratios (DSCR) range between 1.00x and 1.30x under several stress scenarios. Notably, a reduction in distributions under a low SRAC environment and adverse conditions at the Alta projects may restrict project-level distributions and could trigger an event of default under Terra-Gen’s financial covenants. (Debt Service: Weaker)

RATING SENSITIVITIES

— Erosion of distributions from portfolio projects due to low energy production, low energy pricing, or other performance factors (e.g. curtailment at Alta);

— Extensive use of reserve liquidity (debt service reserve facilities);

— Potential violation of Terra-Gen’s financial covenants, such as the DSCR or debt-to-cash available for debt service ratio (debt-to-CADS).

SECURITY

The loan facilities are secured by a first-priority security interest in Terra-Gen’s accounts, ownership interests and project dividends.

CREDIT UPDATE

Since reaching financial close in mid-2011, cash flow to Terra-Gen has been below expectations through the combination of lower-than-projected SRAC pricing, curtailments, and low wind production at the Alta projects. In the past several quarters, conditions have improved at the Alta projects but low SRAC pricing persists due to the continued low natural gas pricing environment. Terra-Gen’s prior 12-months DSCR in the fourth quarter of 2012 and first quarter of 2013 hovered close to 2.50x, and close to breakeven level on a consolidated basis.

Low market-based SRAC energy prices have resulted in lower distributions at several projects. Fitch expects that geothermal asset Dixie Valley will not meet its near-term project-level distribution tests, likely trapping distributions of approximately $2.5 million (3% of total projected cash flow) for all of 2014. Fitch projects low gas prices to persist over the short-to-medium term, indicating continued pressure on projects exposed to SRAC pricing.

Fitch’s base case reflects the expectation for lower market-based SRAC pricing without altering its expectation for long-term energy production at any individual project. In addition to low SRAC pricing, Fitch’s rating case introduces additional stresses to wind production and operations and maintenance costs at the Alta projects.

Terra-Gen is particularly susceptible to performance shortfalls at the Alta wind projects II-V (Alta Wind 2010 Pass-Through Trust, ‘BBB-‘; Stable Outlook), which comprise the primary source of Terra-Gen’s cash flow. Under rating case conditions, distributions could be reduced or restricted at the Alta projects, resulting in term loan coverage that falls below the minimum DSCR covenant. Barring an equity cure or lender waiver, this would trigger an event of default due to a breach in the loan’s financial covenant.

Fitch also considers Terra-Gen’s financial performance on a consolidated basis, as the loan facilities are structurally subordinate to project-level indebtedness. Fitch projects rating-case consolidated DSCRs averaging 1.17x, with coverage close to breakeven levels in 2014. The Negative Outlook reflects that potential underperformance over the next 12 months may result in a breach in financial covenants or a need to access the debt service reserve to meet obligations, any of which could trigger a downgrade of the facilities’ ratings. Favorably, rating case results suggest improved metrics more consistent with the current rating after 2014.

Terra-Gen is a special-purpose company formed solely to acquire, own and operate a 1,236 MW portfolio consisting of 22 projects, primarily located in California, that generate power using renewable resources. Nearly 90% of the portfolio’s nominal capacity is committed to SCE under various medium- and long-term PPAs. The proceeds of the issuance were used to fully repay pre-existing indebtedness, fund a cash distribution to the sponsors, cash-fund three months of interest within the nine-month debt service reserve, and pay transaction fees and expenses.

Additional information is available at ‘www.fitchratings.com

Applicable Criteria and Related Research:

— ‘Rating Criteria for Infrastructure and Project Finance’ (July 11, 2012).

— ‘Rating Criteria for Onshore Wind Farm Projects’ (April 11, 2013).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Onshore Wind Farm Projects
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=705018

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=802883

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contact:

Fitch Ratings, Inc.

Primary Analyst

Andrew Joynt, +1-212-908-0842

Associate Director

One State Street Plaza

New York, NY 10004

or

Secondary Analyst

Chris Joassin, +1-312-368-3166

Director

or

Committee Chairperson

Gregory Remec, +1-312-606-2339

Senior Director

or

Media Relations, New York

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com […]

Loan Week, February 8-14

Australia


Australian Education Trust has concluded a A$134 million two-year financing on a club basis through joint mandated lead arrangers ANZ and NAB. Both leads contributed equally to the facility.

Proceeds are for working capital, refinancing and general corporate purposes.

India


J Kumar Infraprojects secured a Rs6.5 billion loan package on Tuesday (February 12) through bookrunners and mandated lead arrangers Standard Chartered and Yes Bank.

The financing is split into a Rs3.3 billion five-year bank guarantee facility, a Rs2.2 billion five-year-and-nine-month term loan and a Rs1.1 billion one-year cash credit.

Final allocations saw Yes Bank contribute Rs3.8 billion while Standard Chartered provided Rs1.8 billion. Participant Bank of Maharashtra pledged Rs897 million to complete the syndication.

Proceeds are to finance the construction of two underground tunnels.

NVR Infrastructure and Services has obtained a Rs720 million 13.5-year term loan through sole bookrunner State Bank of India.

Final allocations saw the lead take Rs320 million while participants Vijaya Bank and State Bank of Patiala provided Rs225 million and Rs175 million, respectively.

Proceeds are to support the construction of a 10MW solar power plant located in Rajasthan, India.

New Zealand


SKYCity Entertainment Group has signed a NZ$200 million four-year revolver on a club basis through mandated lead arrangers ANZ, Bank of New Zealand, Commonwealth Bank of Australia and Westpac.

Final allocations saw the banks lend NZ$50 million each.

Proceeds are to repay existing indebtedness.

Taiwan


Golden Bridge (BVI) has signed an $87 million-equivalent dual-currency financing through bookrunners and mandated lead arrangers Mega International Commercial Bank and Taishin International Bank.

The three-year term loan consists of a $70 million tranche and a Rmb105 million portion.

Syndication saw E.Sun Commercial Bank, Hua Nan Commercial Bank, Jih Sun International Bank, Taiwan Business Bank and Yuanta Commercial Bank join in as participants.

Proceeds are for working capital purposes.

Thailand


AJ Technology has secured a Bt210 million nine-year and 10-month financing through sole bookrunner Kasikornbank.

Final allocations saw Kasikornbank and mandated lead arranger Krungthai Bank provide Bt105 million each.

Proceeds are to support the development of a solar power project in Thailand.

Tipayanarai has inked a Bt240 million nine-year-and-10-month term loan through sole bookrunner Kasikornbank.

Final allocations saw Kasikornbank and mandated lead Krungthai Bank contribute Bt120 million each.

Proceeds are to finance a solar power project in Thailand.

© Haymarket Media Limited. All rights reserved.

[…]

Fitch Affirms Terra-Gen Finance Loan Facilities at 'BB-', Outlook Revised to Negative

NEW YORK–(BUSINESS WIRE)–

Fitch Ratings affirms the ‘BB-‘ rating on Terra-Gen Finance Company, LLC’s (Terra-Gen) $250 million term loan facility and $60 million working capital facility. The Rating Outlook is revised to Negative.

The Negative Outlook reflects Terra-Gen’s weakening projected financial profile that could result in insufficient distributions from the portfolio’s projects.

KEY RATING DRIVERS

–Contracted Revenue Base: Revenues are primarily derived from projects with fixed-price power purchase agreements (PPAs) with Southern California Edison (SCE, rated ‘A-‘ with a Stable Outlook by Fitch). Approximately 30% of portfolio capacity is exposed to price volatility under PPAs that derive energy payments through the market-based short-run avoided cost (SRAC) methodology.

–Limited Portfolio Diversification: Terra-Gen is particularly susceptible to performance shortfalls at the recently completed Alta wind projects II-V (Alta Wind 2010 Pass-Through Trust, ‘BBB-‘, Stable Outlook), which comprise the primary source of Terra-Gen’s cash flow. Portfolio diversity through the other projects partially mitigates operational risks at Alta.

–Structural Subordination: The Terra-Gen loan facilities are structurally subordinated to project-level indebtedness, and repayment is contingent upon sufficient distributions from the portfolio’s projects.

–Exposure to Refinance Risk: Fitch views refinancing risk as low, based upon the strong likelihood that Terra-Gen will be able to refinance the term loan facility at maturity in mid-2017 under a stressed refinancing scenario. Despite the elevated risk of a long-term profile, fixed-price contractual revenues and a cash sweep mechanism to reduce leverage are positive factors.

WHAT COULD TRIGGER A RATING ACTION

–Erosion of distributions from portfolio projects due to low energy production, low energy pricing, or other performance factors (e.g. curtailment at Alta);

–Use of reserve liquidity (debt service reserve facilities);

–Potential violation of Terra-Gen’s financial covenants, such as the debt service coverage ratio (DSCR) or debt-to-cash available for debt service ratio (debt-to-CADS).

SECURITY

The loan facilities are secured by a first-priority security interest in Terra-Gen’s accounts, ownership interests and project dividends.

CREDIT UPDATE

Following financial close in June 2011, cash flow to Terra-Gen has been below expectations through the combination of lower-than-projected SRAC pricing, frequent curtailments at the Alta projects, and low wind production in 2011 at the Alta projects. Despite lower cash flow from the portfolio’s projects, there have been no unexpected instances of restricted distributions due to project-level cash trapping.

The current low gas environment has pushed market-based SRAC energy prices as much as 37% below projected levels, resulting in lower distributions at several projects. Fitch projects low gas prices to persist over the short-to-medium term, indicating that SRAC prices will also remain lower than originally projected.

Fitch has not changed its expectation for future curtailment, as Alta’s frequent early-2012 curtailments were due to a now-complete major substation upgrade. Likewise, Fitch has not altered its projections for wind production at the Alta projects, as the wind resource has not displayed significant and sustained deviation from the original wind assessment.

Fitch’s base case reflects the expectation for lower market-based SRAC pricing without altering its expectation for long-term energy production at any individual project. In addition to low SRAC pricing, Fitch’s rating case introduces additional stresses to wind production and operations and maintenance costs at the Alta projects to assess Terra-Gen’s dependence on distributions from these projects.

Fitch considers Terra-Gen’s financial performance on a consolidated basis, as the loan facilities are structurally subordinate to project-level indebtedness. The rating-case consolidated DSCR averages 1.13x, with a minimum 1.00x in 2013. The Negative Outlook reflects that underperformance may result in a need to access reserves to fulfill debt obligations, which would indicate a profile inconsistent with the current rating category.

Terra-Gen is a special-purpose company formed solely to acquire, own and operate a 1,236 MW portfolio consisting of 22 projects, primarily located in California, that generate power using renewable resources. Nearly 90% of the portfolio’s nominal capacity is committed to SCE under various medium- and long-term PPAs. The proceeds of the issuance were used to fully repay pre-existing indebtedness, fund a cash distribution to the sponsors, cash-fund three months of interest within the nine-month debt service reserve, and pay transaction fees and expenses.

Additional information is available at ‘www.fitchratings.com‘. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

–‘Rating Criteria for Infrastructure and Project Finance’ (July 11, 2012).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE.

Contact:

Fitch Ratings

Primary Analyst

Andrew Joynt, +1 212-908-0842

Associate Director

Fitch Ratings, One State Street Plaza, New York, NY 10004

or

Secondary Analyst

Chris Joassin, +1 312-368-3166

Director

or

Committee Chairperson

Gregory Remec, +1 312-606-2339

Senior Director

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

Email:

elizabeth.fogerty@fitchratings.com […]

Turkey Has ‘Very Large’ Loan Demand on Cash Challenge, EBRD Says

By Emre Peker – 2012-05-31T10:07:17Z

Turkish demand for loans from the European Bank for Reconstruction & Development is “very large” amid a challenging financing environment, a bank official said.

Infrastructure projects may have to be revised to include more equity investments as debt funding is scarce because of the euro area financial crisis, EBRD First Vice President Varel Freeman said in an interview in Ankara yesterday, when he inaugurated the London-based bank’s second office in Turkey.

Prime Minister Recep Tayyip Erdogan is seeking to propel Turkey’s $772 billion economy with at least $10 billion of construction investments, including highways, bridges and tunnels Turkish banks have been unable to plug a funding gap as European lenders have curbed lending to strengthen their balance sheets.

“The EBRD itself is not going to be the answer, we’re not going to be pouring 30 billion euros into a series of infrastructure projects,” Freeman said. “We don’t have the balance sheet for that, but what we can do is to provide, very carefully, catalytic money that can help mobilize others to join us, to help improve the risk perception that other financiers have coming into these projects.”

Since opening its first office in Istanbul in 2009, the EBRD’s loans and equity investments in Turkey have risen to 1.5 billion euros ($1.86 billion) as of last year. The bank’s annual lending target in Turkey is 1 billion euros, with a focus on financial firms, energy projects, infrastructure investments and privatizations.

“I’m quite confident of the overall degree of success that will be encountered, but it will not come quickly it will not come automatically,” Freeman said. “We find a very large demand from private-sector companies and potential municipal partners for EBRD’s loans and equity invests here.”

To contact the reporter on this story: Emre Peker in Ankara at epeker2@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

Facebook Share LinkedIn Google +1 Print

QUEUE

Please enable JavaScript to view the comments powered by Disqus. […]

Fitch Affirms Mackinaw Power LLC at 'BBB-' & Mackinaw Power Holdings LLC at 'BB-'; Outlook Stable

NEW YORK–(BUSINESS WIRE)–

Fitch Ratings has affirmed the ‘BBB-‘ rating on Mackinaw Power, LLC’s (Mackinaw) $288.9 million ($219.6 million outstanding) senior secured bonds (senior bonds), and affirms the ‘BB-‘ rating on Mackinaw Power Holdings, LLC’s (MPH) $147 million ($119 million outstanding) senior secured term loan (term loan). The ratings affirmations and Stable Outlooks reflect Fitch’s assessment of the ability to provide full and timely payment of the debt service obligations solely from operating cash flows.

KEY RATING DRIVERS

–Stable Historical Performance: Operating costs, heat rates, and availability have been consistent with expectations.

–Substantially Contracted Cash Flows: Cash flows are nearly fully contracted under tolling agreements with investment grade off-takers through 2015. Beyond 2015, approximately 60% of total portfolio capacity is contracted through senior notes maturity in 2023.

–Conventional Technology: Plants utilize conventional and proven natural gas-fired generation with maintenance risk diversified across a portfolio of five facilities.

–Term Loan Refinance Risk: Fitch expects a bullet of roughly $100M upon maturity of the term loan. Refinance risk is considered midrange, as expiring tolling agreements are likely to be replaced before 2015.

WHAT COULD TRIGGER A RATING ACTION

–Significant change in recontracting risk

–Dramatic shift in the regional power market

–Substantial deviation in term loan principal amortization relative to projected levels

SECURITY

The notes are secured by a perfected first priority security interest in all tangible and intangible assets of Mackinaw and the Project Companies, the membership interests in Mackinaw held by MPH, the debt service reserve and the major maintenance reserve. The term loan is secured by a perfected first priority security interest in all tangible and intangible assets of MPH, and the letter of credit-funded debt service reserve.

CREDIT UPDATE

Following the mid-year outage at Effingham, Mackinaw installed a new GE compressor rotor and has returned the unit to full service. Since then, Effingham and the other facilities have resumed performance consistent with historical levels of operating costs, heat rates, and availability. Cash available to meet senior debt obligations was reduced in 2011 due to the cost of installing the new Effingham rotor, along with some reduced capacity payments during the outage. Fitch views 2011’s reduced operating margin as a one-time dip, rather than a long-term shift in expected operational and financial performance. Fitch notes that dispatch at Effingham has increased in the past year, resulting in higher energy revenues as well as an accelerated major maintenance schedule, which will shift the timing of related accrual of major maintenance funds.

Debt service coverage ratios (DSCR) for the senior bonds have been fairly consistent with base case projections since the mid-2007 acquisition. Coverage ratios are based exclusively on contracted cash flows and, in Fitch’s combined stress Rating Case, are expected to average 1.38x from 2012 through 2015, with a minimum of 1.35x. After 2015, two of the tolling agreements expire, and DSCRs based exclusively on contracted cash flow are expected to fall to an average of 1.32x. Any incremental merchant power sales should increase coverage levels, though the sponsors are evaluating extension or replacement of the expiring power sales contracts to avoid merchant risk.

The term loan rating reflects consolidated debt service coverage for both principal and interest on the senior bonds and interest payments on the structurally subordinated term loan under Fitch’s combined stress Rating Case. From 2012 – 2015, the Rating Case DSCR averages 1.20x, with a minimum of 1.12x. Principal payments on the term loan via the cash sweep mechanism are reducing the bullet that will need to be refinanced at maturity.

To assess refinancing risk, Fitch constructed a refinancing scenario that assumes fixed amortization at a 9% interest rate over an eight-year term with debt maturing in 2023, six months before the expiration of the tolling agreements for the Monroe and Walton facilities, and a portion of the Washington facility. Fitch expects that the expiring tolling agreements at Effingham and Washington will be extended or replaced, and ran a refinancing scenario assuming conservative pricing terms on new PPAs. Fitch views refinancing risk of the MPH term loan as midrange, though this attribute would be strengthened if new contracts are secured at Effingham and Washington.

The projects held by Mackinaw and MPH sell energy and capacity under long-term fixed-price power purchase agreements (PPAs) with Constellation Energy Commodities Group, Inc. (owned by Exelon, IDR ‘BBB+’; Stable Outlook by Fitch) and Georgia Power Company (GPC, IDR ‘A+’; Stable Outlook). The PPAs are structured as tolling agreements, and the off-takers are responsible for providing natural gas fuel. The off-takers have full dispatch rights over the contracted capacity and make fixed escalating monthly capacity payments. These cash flows are the primary source of income, which are used to make semi-annual principal and interest payments to the senior secured bonds. Excess cash flow, if any, is distributed to MPH and used to make quarterly interest payments on the term loan. Fifty percent of any remaining cash flow at MPH is used for annual term loan principal repayments. Equity interests in the projects are owned indirectly by majority owner ArcLight Energy Partners Fund III, LP, as well as minority owner affiliates of GE Capital and Government of Singapore Investment Corporation.

Additional information is available at ‘www.fitchratings.com‘. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

–‘Rating Criteria for Infrastructure and Project Finance’ (Aug. 16, 2011);

–‘Rating Criteria for Thermal Power Projects’ (June 20, 2011).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832

Rating Criteria for Thermal Power Projects

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=639073

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE.

Contact:

Fitch Ratings

Primary Analyst

Andrew Joynt, +1-212-908-0842

Associate Director

One State Street Plaza

New York, NY 10004

or

Secondary Analyst

Cynthia Howells, +1-212-908-0685

Director

or

Committee Chairperson

Gregory Remec, +1-312-606-2339

Senior Director

or

Media Relations

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com […]

Zimbabwe: Bulawayo Council Under Fire

[Financial Gazette] The cash-strapped Bulawayo City Council (BCC) has come under heavy fire from residents following media reports this week that the local authority could lose Tower Block, Revenue Hall and other properties due to an unpaid bank loan. The city fathers took the loan to purchase top-of-the-range vehicles for senior staff members. […]

Funding costs lift loan rates v cash: RBA

22 Mar 2012 7:16 PM […]