Moody's ups Covanta, rates loans B1, B2

Moody's Investors Service assigned a B1 rating to Covanta Energy Corp.'s proposed $690 million new first-lien credit facilities, including its $250 million first-lien term loan, $100 million first-lien revolving credit facility and $340 million first-lien synthetic letter-of-credit facility.

Moody's assigned a B2 rating to Covanta's proposed $425 million new second-lien term loan facility.

Moody's upgraded Covanta's senior implied rating to Ba3 from B3, issuer rating to B2 from Caa1 and speculative grade liquidity rating to SGL-2 from SGL-3. The outlook is stable.

Moody's also upgraded the rating on Covanta's outstanding third-lien 8¼% senior secured notes to B3 from Caa1.

The new credit facilities are being issued to refinance existing debt at Covanta and finance Covanta's pending acquisition of American Ref-Fuel Holdings Corp., which owns MSW Energy Holdings LLC, MSW Energy Holdings II LLC and American Ref-Fuel Co., LLC.

Moody's said the upgrades reflect the substantial improvement that is expected in Covanta's consolidated financial measures as a result of the acquisition, the stability of ARC's cash flows and the diversification benefits from deriving operating cash flow from a larger number of underlying operating projects.

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