S&P rates TPF II loans BB-

Standard & Poor’s said it assigned a preliminary BB- rating and preliminary 1 recovery rating to TPF II Power LLC’s proposed $1.5 billion senior secured first-lien term loan due 2021 and $90 million revolving credit facility due 2019.

TPF II Covert Midco LLC is co-issuer with TPF II and is a joint and several obligor.

TPF II expects to be a ring-fenced, special-purpose entity owning close to 4.9 gigawatts of generation capacity from seven separate plants in the Pennsylvania, Jersey and Maryland Interconnection, as well as the Midcontinent Independent System Operator and New York Independent System Operator power markets, S&P said.

The company will use proceeds to repay existing subsidiary debt, fund a debt service reserve account and make a distribution to the sponsors, the agency said. The term loan matures in 2021 and the revolving facility in 2019, S&P said.

The ratings reflect the portfolio’s exposure to merchant energy and capacity markets and high capital spending needs, although these risks are partially offset by their position in strong markets that have visibility into capacity prices for several years and favorable supply and demand dynamics, the agency said.

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