DALLAS - A flurry of rating actions have adjusted the credits of billions of dollars worth of prepaid gas deals in the first month of the year.
Moody's Investors Service this week downgraded at least three deals to Baa1 based on their guaranteed investment agreements with MBIA Insurance Corp.
Tennessee Energy Acquisition Corp. Gas Project's $1 billion of Series 2006A revenue bonds were lowered from A1. Moody's had dropped the credit to A1 on Dec. 17 and left it on watch for another downgrade.
Salt Verde Financial Corp.'s $1.23 billion of revenue bonds were lowered from A2. Salt Verde, which serves Arizona's public utilities, was last downgraded Dec. 22 and left on watch.
Central Plains Energy Project's $502 million of revenue bonds were lowered from A1. The purchaser for Nebraska public utilities was also downgraded previously on Dec. 17.
Earlier this month, Moody's and Standard & Poor's upgraded Main Street Natural Gas Inc.'s $527.6 million of Series 2006B revenue bonds based on the rating of Merrill Lynch & Co., which supplies gas through its commodities subsidiary.
The ratings were placed on watch when Merrill was being acquired by Bank of America in the virtual collapse of Wall Street's investment banking firms last year. Bank of America closed the deal on Jan. 6, and Standard & Poor's issued its upgrade from A to A-plus the following day.
Moody's upgraded the Main Street bonds a week later to A1 from A2 on the heels of its upgrade of Merrill Lynch to Aa3 from A2. Transamerica Life Insurance Co. is the guarantee investment agreement provider on the gas deal.
Prepaid gas deal ratings are based on the lowest-rated counterparty in each transaction.
Main Street is a special-purpose vehicle established to issue two series of bonds, proceeds of which are funding the prepayment of 217 billion cubic feet of gas scheduled for delivery over 15 years. Main Street sells the gas to municipalities and joint-action agencies at the first-of-the month index price, minus a predetermined discount.
With the market turmoil of 2008, bond issuance for pre-paid gas deals came to a standstill as energy prices soared to record levels in the first half of the year then plummeted to unforeseen lows by the end of the year.
