S&P downgrades Hovensa

Standard & Poor's said it lowered the recovery rating on Hovensa LLC's $400 million first-lien revolving credit facility due in 2011-2012 and its $355.7 million of tax-exempt debt issued by the U.S. Virgin Islands and the Virgin Islands Public Finance Authority to 2 from 1.

The project rating remains B and the outlook remains negative.

The 2 recovery rating indicates 70% to 90% expected recovery in a default.

The revised recovery score reflects the high cost structure and level of mandatory capital spending required at the facility, which is likely to impair lender recovery value in the event of default compared to previous analysis, S&P said.

The agency said it lowered the rating despite the fact that the revolving credit facility will mature in 2011 and 2012, leaving the project with less debt outstanding in 2013.

The current rating reflects its weak financial profile, which is expected to continue to be pressured by low margins and negative project cash flows through at least 2013, S&P said.

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