SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions for Centrais Eletricas do Para S.A. (Celpa):
--Foreign and local currency Issuer Default Rating (IDR) upgraded to 'B-' from 'D';
--National scale rating upgraded to 'BB+(bra)' from 'D(bra)';
--USD250 million senior unsecured notes upgraded to 'B-/RR4' from 'C/RR4'.
The Rating Outlook is Stable.
KEY RATING DRIVERS
The ratings' upgrade follows the announcement that Equatorial has concluded the acquisition of 65.18% of Celpa's voting capital, equivalent to 61.37% of its total shares as of Dec. 31, 2012, for BRL1 and Fitch's expectations that the new shareholder will be able to successfully promote its financial and operational recovery plan. Fitch views positively Equatorial's management track record in acquiring and promoting the turnaround of an energy distribution company, Companhia Energetica do Maranhao (rated 'AA-(bra)'), in the past.
The rating actions are also supported by the debt restructuring, which resulted in an extended debt maturity schedule for the coming years and lower financial cost. The conditions for Equatorial's acquisition also benefits Celpa's liquidity. A minimum cash injection of BRL700 million within two years is required, with the first equity contribution of BRL350 million already received in December 2012.
Celpa has the challenge to recover its operational efficiency and improve its cash flow generation. Positively, the company received its tariff adjustment of 12.77% in August 2012, which was previously suspended due to the request of the bankruptcy protection. The Brazilian regulatory body Agencia Nacional de Energia Eletrica (Aneel) also agreed that future penalties for non-compliance with quality targets turns into a capex obligation instead of being paid by the company. In the last 12 months ended Sept. 30, 2012, EBITDA was negative at BRL46 million with total debt of BRL2.6 billion and cash of BRL203 million.
RATING SENSITIVITIES
A positive rating action should occur when Celpa starts recovering its operational profitability, based on the new shareholders' actions, coupled with an extended debt maturity profile.
A negative rating action could be triggered by the company's failure to present an improvement in its cash flow generation which could lead to pressure on its debt amortization capacity.
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. 08, 2012);
--Distressed Debt Exchange Criteria' (Aug.08, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
Distressed Debt Exchange
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685903
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