TEXT-S&P puts EnergySolutions ratings on watch negative

Tue Jun 12, 2012 12:22pm EDT

June 12 - Overview	
     -- EnergySolutions Inc. recently announced its board of directors
has replaced the company's CEO and CFO, and management has lowered the company's	
annual earnings guidance by $20 million to $130 million to $140 million.	
     -- We are placing the ratings on EnergySolutions and its subsidiaries on 	
CreditWatch with negative implications.	
     -- We expect to resolve the CreditWatch placement following a review of 	
our updated expectations and the implications of the management changes.	
	
	
Rating Action	
On June 12, 2012, Standard & Poor's Ratings Services placed its ratings, 	
including its 'BB-' corporate credit rating, on Salt Lake City-based 	
EnergySolutions Inc. and its subsidiaries on CreditWatch with negative 	
implications.	
	
Rationale	
The CreditWatch placement reflects our view that EnergySolutions' financial 	
profile is unlikely to improve to levels consist with our previous 	
expectations for the ratings. We now believe the funds from operations to debt 	
ratio could fail to meet our previous expectations of 15% to 20% during the 	
next year. EnergySolutions' lowered its guidance for adjusted EBITDA in 2012 	
to $130 million to $140 million, down $20 million from the $150 million to 	
$160 million guidance it had given during its first quarter earnings release 	
in May 2012. The company has a high adjusted debt balance at $574 million as 	
of its first quarter ended March 31, 2012. We adjust debt to incorporate the 	
capitalization of operating leases, asset retirement obligations, and 	
restricted cash balances related to certain letters of credit. The company's 	
trailing-12-month FFO to debt ratio of 12% was already lower than our 	
expectations, and it could remain between 10% and 15% during the next year 	
absent further debt reduction or improved cash flow.  	
	
The company indicated the amount of waste volumes shipped to its Clive, Utah, 	
disposal site from its government and commercial customers remains slow and 	
administrative cost savings will take longer to realize than it initially 	
expected. In addition to reduced operating prospects, the changes in key 	
management positions gives rise to additional uncertainty regarding the 	
company's strategic and financial philosophies. Although the former management 	
expressed optimism that a plan of action regarding the release of a $200 	
million cash-collateralized letter of credit related to the company's Zion 	
decommissioning project was likely to be realized in 2012, it now appears that 	
such resolution could be delayed.	
	
CreditWatch	
The CreditWatch placement indicates our view that there is an increased 	
probability we could lower the ratings on EnergySolutions, perhaps by more 	
than one notch. We expect to resolve or update the CreditWatch placement 	
following a review of our updated expectations for financial performance and 	
the implications of the management changes.	
	
Related Criteria And Research	
Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 	
2009	
	
Ratings List	
Ratings Placed On CreditWatch	
                                        To                 From	
EnergySolutions Inc.	
 Corporate Credit Rating                BB-/Watch Neg/--   BB-/Negative/--	
 Senior Secured                         BB-/Watch Neg      BB- 	
  Recovery Rating                       4                  4	
	
EnergySolutions LLC	
 Senior Secured                         BB+/Watch Neg      BB+	
  Recovery Rating                       1                  1	
 Senior Unsecured                       BB-/Watch Neg      BB-	
  Recovery Rating                       4                  4	
	
Complete ratings information is available to subscribers of RatingsDirect on 	
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 	
by this rating action can be found on Standard & Poor's public Web site at 	
www.standardandpoors.com. Use the Ratings search box located in the left 	
column.
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