Moody's Downgrades Coso Geothermal Power Debt (Moodys.com - Press Release)
Moody's Investors Service today downgraded Coso Geothermal Power Holding's pass through trust certificates to Caa2 from Caa1. The outlook remains negative.
The rating action reflects Moody's expectation of a payment default around 2016 due to continuing energy production challenges at Coso. As of March 2013, energy production was 36% below original forecast and the project generates insufficient cash flow to fully pay debt service. In January 2013, Coso drew $9.7 million from its debt service (DSR) letter of credit. Further draws on the DSR LC are expected over time and we expect Coso will fully deplete the reserve around 2016.
We also recognize that the project could default sooner if Coso's $55 million letter of credit facility expiring in early December 2014 is not extended. An inability to extend the letter of credit facility could ultimately lead to a default on Coso's pass through certificates since a default on $15 million of project letters of credit cross defaults to Coso's rated debt. A default on the $40 million DSR LC is not anticipated to cross default to Coso's rated debt.
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