OREANDA-NEWS. S&P Global Ratings said today that it affirmed its 'B-' corporate credit rating on TerraForm Private LLC. We also removed the ratings from CreditWatch, where they were placed with negative implications on May 25, 2016. The outlook is stable.

The 'B' issue-level rating on the secured term loan, and '2' recovery rating are unchanged. The '2' recovery rating indicates our expectation for substantial (70%-90%; upper half of the range) recovery in a default scenario.

"The CreditWatch resolution stems from our understanding of the issuer's operations in the possible void of TerraForm Power's participation in the company," said S&P Global Ratings credit analyst Michael Ferguson.

We had previously developed a base case forecast on the assumption that assets would periodically be sold to TerraForm Power, which would provide the issuer with cash flow to retire debt and ultimately improve credit metrics. However, TerraForm Power's ongoing struggles related to governance and parent issues have called this assumption into question. Thus, we now rely on the ability of the preferred equity holders to maintain these assets, which have performed in line with our expectations, or sell the assets outside of the arrangement with TerraForm Power; we expect either outcome would be preferable to relying on TerraForm Power to purchase the assets, as these assets continue to have significant value. However, the weakness of SunEdison still weighs on this rating, though we do not expect that TerraForm Private will be pulled into SunEdison's bankruptcy proceedings due to the presence of appropriate ring fencing.

Per our group ratings methodology, we generally do not lower the ratings of insulated subsidiaries, like TerraForm Private, below 'B-' unless we believe that the subsidiary would likely be drawn into an insolvency of the parent company. The outlook on TerraForm Private is stable, as its SACP of 'b' is above its corporate credit rating of 'B-'.