Moody’s Investors Service last week warned of a possible downgrade to bonds issued by the Central Plains Energy Project in 2007.

The agency put the Ba3-rated debt, which totals more than $500 million, on watch for downgrade following its downgrade of MBIA Inc. to B2 from Ba3.

The bonds are linked to MBIA through a repurchase agreement that is also insured by MBIA Insurance Corp., which is rated B3 and on watch for downgrade.

Analysts said they would monitor CPED over the next several weeks to see if it takes any action to reduce its exposure to the bank.

CPED was formed in 2006 and partners with utilities and municipalities in Nebraska and Iowa. It has $536 million of outstanding gas project revenue bonds, all of which were issued in 2007. The bonds were downgraded by Moody’s and Fitch Ratings in 2009.

Since 2008, rating agencies have downgraded billions of dollars of prepaid gas bonds due to the failure of investment banks, which often acted as gas suppliers to the issuers.

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