Metronet bank loan ratings cut, withdrawn; underlying ratings raised

MUMBAI, Feb. 29, 2008 (Thomson Financial delivered by Newstex) — Standard Poor’s (NYSE:MHP) Ratings Services said it has lowered to ‘D’ from ‘CC’ its long-term debt rating on the 810 mln stg senior secured bank loan facilities due 2030 issued by UK-based underground rail infrastructure financing companies Metronet Rail BCV Finance PLC and Metronet Rail SSL Finance PLC, collectively known as the Metronet companies.

The ratings agency said the downgrade reflects its understanding the cash received under the ‘put option’ from London Underground Ltd is insufficient to pay the entire outstanding principal and any accrued interest on the loan facilities. S P said the ratings were also removed from creditwatch. The ratings agency meanwhile, revised the recovery rating on the bank loan to ‘3′ from ‘1′, reflecting its expectation of 50-70 pct recovery of principal in the event of a payment default.

S P subsequently withdrew the bank loan and recovery ratings. It raised to ‘B’ from ‘CC’ its long-term underlying senior secured debt ratings on the 165 mln stg index-linked bonds and the 350 mln stg fixed-rate bonds due 2032. It added the ratings remain on positive watch. The creditwatch status reflects the cash backing of the guaranteed obligations through the cash proceeds received from the payment of the underpinned amount under the put option.

In addition, S P affirmed its ‘AAA’ insured debt ratings on the fixed-rate and index-linked bonds guaranteed by Financial Security Assurance (UK) Ltd. It said the ‘AAA’ insured debt ratings on the fixed-rate and index-linked bonds guaranteed by Ambac Assurance UK Ltd remain on negative watch, reflecting the creditwatch status of Ambac. The insured debt ratings reflect the unconditional and irrevocable guarantees of payment of scheduled principal and interest by FSA and Ambac.