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
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