PF Archive

Up tools

01 11 2002

As creditworthiness among energy companies vulnerable to their unregulated arms continues to take a thrashing, bankers predictably tend to put the best face they can on the situation. But they cannot deny the devastation and admit they are trying everything possible to limit the damages to their portfolios underneath a landslide of refinancings and worse. While new utility project lending is off the agendas of project finance bankers, particularly if merchant-related, selective lending for transactions that hone to fundamentals remains feasible ? if few and far between. ?We tend to be more fortunate than others because we're not in every bad deal, we're only in a few,? says Bruno Mejan, head of structured finance at NordLB's New York branch, with a resigned laugh. A ?selective? approach toward energy deals helped, and ?we were not as aggressive as some of our competitors,? Mejan says. Most of the assets in NordLB's portfolio are completed or almost so, unlike projects that have to drum up financing for a plant that's 45% built, Mejan says. To be sure, the gallows humor that prevails among bankers these days is based more on reality than whimsy. A Standard & Poor's report on the utilities industry dated October 2002 produced by credit analyst Barbara Eiseman says ?the number of companies rated ?A' and above has significantly declined? as the ranks of firms rated ?BBB' have swelled to nearly half of the industry compared with 40% at end-September 2001. Moreover, some 11% of firms in the sector are now rated sub-investment grade (five carrying ?D' ratings) compared with 5% at the end of the 2001 third quarter, the report says....