Market watchers are saying ring-fenced structuring could be what's driving up the price of Mission Energy's bank debt, which last week hit 98, trading up from the 96 level for new issue discount offered during syndication The $385 million loan closed more than a month ago and is priced at LIBOR plus 71/ 2%. Goldman Sachs and Lehman Brothers lead the deal. Ring-fenced financing ties bank risk to generating assets rather than the utility company itself, which can help a credit stay afloat even if the parent operations struggle.
Peter Rigby is an analyst at Standard & Poor's, who rated Mission Energy. "The company already had a natural separation from its parent, EIX [Edison International]," said Rigby, explaining how that helped Mission Energy secure the protection. The term ring-fenced started in the United Kingdom, and refers to protection measures companies there took in the case that parent companies in the United States went bankrupt and forced them into bankruptcy. Calls to Kevin Smith, cfo of Edison Mission, were referred to the investor relations office and not returned by press time.