OREANDA-NEWS. S&P Global Ratings said today that it both lowered and raised various issue-level ratings on certain pollution control revenue refunding bonds, issued by multiple development authorities with FirstEnergy Nuclear Generation LLC (FENG) or FirstEnergy Generation LLC (FEG) as obligors. FirstEnergy Solutions Corp. provides an indirect guarantee on these bonds.

On Aug. 1, 2016, we lowered the corporate credit ratings on U. S. unregulated power company FirstEnergy Solutions Corp. and its affiliates to 'BB-' from 'BBB-'. The rating action followed our conclusion that the companies no longer have strategic importance to parent FirstEnergy Corp., meaning we expect no parent support going forward. We believe the companies' business risk in wholesale power markets is higher, reflecting our assessment of a weaker competitive position, which is evident from the decline in capacity factors and economic generation due to production costs higher than regional peers.

As a result of this rating action, ratings on all unsecured obligations were lowered to 'BB-'. However, issue-level ratings on secured obligations are notched two above FirstEnergy Solutions' 'BB-' corporate credit rating based on our '1' recovery score on the senior secured debt at FENG and FEG, indicating our expectation for very high recovery (90%-100%) under a payment default.

Most of the bonds being remarketed are currently issued on an unsecured basis but are now being remarketed on a secured basis. Three series of bonds were backed by a letter of credit (LOC) from the Bank of Nova Scotia, which resulted in the 'A+' ratings assigned to the bonds. FirstEnergy Solutions Corp. has reoffered the bonds on a senior secured basis with affiliates FENG or FEG as obligors. The FEG bonds, which currently have a bank LOC will be subject to mandatory purchase on August 15, 2016, resulting in the lowering of the rating from 'A+' to 'BB+', since the bank LOC will be terminated. We have assigned these bonds a '1' recovery rating.

Ratings on the other series of bonds are raised to 'BB+' from 'BB-' because they are now being refinanced on a secured basis. We have revised the recovery rating on this debt to '1' from '3,' because these now are secured obligations.