Moody’s Investors Service Monday placed on review for upgrade the Ba3 rating on the Tennessee Energy Acquisition Corp.’s 2006A gas project revenue bonds.
The action affects $1.81 billion of outstanding bonds. The rating is based on the rating of insurer MBIA Inc., as the lowest-rated entity in connection with the bonds, Moody’s said.
“Moody’s has received and reviewed proposed amendments to the structure of the transaction, which would provide credit support for the project participants, MBIA Inc. and Depfa Bank PLC, as the investment-agreement providers for the senior subaccount and reserve subaccount of the debt-service reserve account,” the agency said.
TEAC is currently soliciting consent from a majority of bondholders through Jan. 6 to make changes in the indenture and the gas-purchase agreement to reduce reliance on the performance of MBIA and Depfa, and provide additional credit support, according to notices filed on the Municipal Securities Rulemaking Board’s EMMA site.
The changes are designed to improve Moody’s rating, as well as Standard & Poor’s B rating, TEAC said.
If the majority of bondholders approve of the changes, and various agreements are executed, Moody’s said the ratings of Depfa and MBIA would no longer be considered material to its rating.
“As a result, the rating on the bonds would be upgraded to A3, based on the rating of Citigroup Financial Products Inc., as the lowest-rated entity material to the rating on the bonds,” Moody’s said.
Fitch Ratings rates the bonds A-plus.