Fitch Downgrades EME and MWG's IDRs to 'C' From 'CC'

NEW YORK--()--Fitch Ratings has downgraded Edison Mission Energy (EME) and Midwest Generation LLC's (MWG) Long-term Issuer Default (IDR) ratings to 'C' from 'CC'. Fitch has also affirmed EME's senior unsecured debt and recovery ratings at 'C' and RR5, respectively. Fitch notes that MWG's secured working capital facility expired in June 2012. Approximately $3.7 billion of long-term, senior unsecured debt is affected by the rating action.

The ratings of Edison International (EIX) and Southern California Edison (SCE) are not affected by the rating action. EIX has managed EME on a stand-alone basis. Fitch does not expect any direct financial exposure to result from the anticipated EME bankruptcy. Similarly, SCE operations are separate from EIX and EME consistent with prevailing California Public Utilities Commission regulations.

Fitch considers 'C' category credits to possess exceptionally high levels of credit risk. The 'C' category also indicates default is imminent or inevitable, or the issuer is in standstill.

Conditions indicative of a 'C' category rating include:

--That the issuer has entered into a grace or cure period following non-payment of a material financial obligation;

--The issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default on a material financial obligation; or

--Fitch Ratings otherwise believes a condition of 'RD' (Restricted Default) or 'D' (Default) to be imminent or inevitable, including through the formal announcement of a distressed debt exchange.

On Nov. 15, 2012, EME filed form 8k with the Securities and Exchange Commission indicating that the company elected not to make interest payments totaling $97 million on senior unsecured debt scheduled to mature in 2017, 2019 and 2027. EME bond documents provide a 30-day grace period, which expires on Dec. 17, 2012. If the interest payment is not made prior to the end of the grace period on December 17th, the company is likely to file for Chapter 11 protection under the U.S. Bankruptcy Code.

An EME bankruptcy would be an event of default under Midwest Generation, LLC's Powerton-Joliet lease.

'C' is the lowest rating assigned to debt instruments in Fitch's rating scale. The 'RR5' Recovery Rating is based on a recovery level of approximately 11% to 30% of principal claims by senior unsecured creditors.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

-- Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers' (Nov. 13, 2012);

--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693773

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

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Contacts

Fitch Ratings
Primary Analyst
Philip W. Smyth, CFA, +1-212-908-0531
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Glen Grabelsky, +1-212-908-0577
Managing Director
or
Committee Chairperson
Sharon Bonelli, +1-212-908-0581
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Philip W. Smyth, CFA, +1-212-908-0531
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Glen Grabelsky, +1-212-908-0577
Managing Director
or
Committee Chairperson
Sharon Bonelli, +1-212-908-0581
Managing Director
or
Media Relations:
Brian Bertsch, New York, +1 212-908-0549
Email: brian.bertsch@fitchratings.com