Lehman Brothers has pitched a $196 million "B" loan for Teton Power Funding to a handful of investors. The loan backs parent company ArcLight Capital Partners' $301 million acquisition of UtilCo from Aquila. UtilCo is a holding company that has ownership interests in a diversified portfolio of 12 generation projects. The seven-year loan was assigned a B+ rating by Standard & Poor's and is priced at LIBOR plus 31Ž4%.
According to S&P, key risks include an increased reliance on merchant plants, asset concentration and the refinancing of the remaining debt balance beyond maturity in 2011. But supporting the credit, there is portfolio diversification, high availability and no construction risk. Also, 100% of UtilCo's share of the earnings of the generation projects is included in a cash flow sweep provision of the term loan. An ArcLight representative declined comment.