On Dec. 17, 2012, Standard & Poor’s Ratings Services lowered debt ratings on Edison Mission Energy ’s unsecured notes due 2013 and 2016 to ‘D’ from ‘CCC-'.
We lowered the corporate credit rating on Midwest Generation LLC to ‘D’ from ‘CCC-'.
We lowered the rating on the senior secured pass-through certificates related to Midwest Generation to ‘D’ from ‘CCC+'.
We lowered Edison Mission Marketing & Trading Inc.’s corporate credit rating to ‘D’ from ‘CCC-'.
We left unchanged our recovery ratings on EME’s and Midwest Generation’s debt. Rationale As expected, EME filed for Chapter 11 bankruptcy protection today, given the inability to generate sufficient cash from a largely merchant portfolio of power plants to pay expenses, financial obligations, and the large capital spending needs for Midwest Generation to meet environmental emissions regulations. The plan is for EME to transition to an entity independent from parent Edison International within about two years with a supportable capital structure and continue its operations as done currently. Debt reduction will likely be material. The company generates cash from about 10,400 megawatts of mostly merchant power plants with limited geographic and fuel diversity, and high exposure to coal fuels and related regulatory risk. With this bankruptcy filing, we have not changed our recovery estimates for the different classes of debt at EME or Midwest Generation. We perform our enterprise valuation on a discrete asset value basis. We estimate that lenders holding EME’s unsecured noted will have meaningful recovery (50% to 70%) of principal and that Midwest Generation’s pass-through certificate holders will have very high recovery (90% to 100%). These valuations do not include unrestricted cash balances, which might be about $600 million to $700 million at year-end 2012 or the benefits that EME might receive from the tax-allocation agreement with Edison International. We plan to issue a full recovery report on EME and its subsidiaries soon. Related Criteria And Research -- Recovery Study (U.S.): Recoveries Come Into Focus As The Speculative-Grade Cycle Turns Negative, Dec. 13, 2012 -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Edison Mission Energy Corp Credit Rating D/--/-- Senior Unsecured Due 2017, 2019, 2027 D Recovery Rating 3 Ratings Lowered; Recovery Ratings Unchanged To From Edison Mission Energy Senior Unsecured Due 2013, 2016 D CCC- Recovery Rating 3 Edison Mission Marketing & Trading Inc. Corp Credit Rating D/--/-- CCC-/Negative/-- Midwest Generation LLC Corp Credit Rating D/--/-- CCC-/Negative/-- Senior Secured D CCC+ Recovery Rating 1
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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. Primary Credit Analyst: Terry A Pratt, New York (1) 212-438-1000; firstname.lastname@example.org Secondary Contact: Aneesh Prabhu, CFA, FRM, New York (1) 212-438-1000; email@example.com