BUENOS AIRES, Argentina--(BUSINESS WIRE)--Fitch Ratings has affirmed and withdraw the following ratings of Transportadora Gas del Sur S.A. (TGS):
--Foreign currency Issuer Default Rating (IDR) at 'B-'; Outlook Negative;
--Local currency IDR at 'B'; Outlook Negative;
--Unsecured debt at 'B-/RR4'.
The reason for the withdrawal is that TGS and its debt instrument are no longer considered by Fitch to be relevant to the agency's coverage. Fitch will not continue covering the issue or the issuer.
KEY RATINGS DRIVERS
TGS's ratings continue to reflect the weak regulatory framework that has affected the company's original business model. The company's core business, its natural gas transportation unit has been operating with frozen tariffs since 1999, reducing its share over EBITDA to approximately 24% while its liquefied natural gas (LNG) processing unit represents 72%. Fitch believes that the company's credit quality is likely to come under pressure, should unfavorable regulatory and operating events affect TGS's LNG business unit. Additional concerns include cost pressures derived from double digit inflation.
TGS's conservative capital structure mitigates existing operational and regulatory risks. As of June 2013, debt was USD381 million, with a debt to EBITDA of 2.1 times (x), which is low for the credit category. Debt is concentrated in the long-term with no debt maturities until May 2014.
Despite frozen tariffs for its pipeline business and rising inflation, TGS has maintained good cash generation levels, which mostly reflect high international prices for LNG. For the quarter ended June 30, 2013, TGS's EBITDA was 99.12 million, 9% higher than the same period in 2012.
RATING SENSITIVITIES
TGS's foreign currency IDR is constrained by Argentina's country ceiling of 'B' and its Recovery Rating of 'RR4' is constrained by the soft cap of 'RR4' for bonds issued by Argentine Corporates. Negative credit factors considered by the ratings are the natural gas unavailability, sharp and sustained decrease in LNG prices and change in sovereign credit quality.
Additional information is available 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013);
--'Liquidity Considerations for Corporate Issues' (June 12, 2007);
--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers' (Nov. 24, 2009).
Applicable Criteria and Related Research:
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
Liquidity Considerations for Corporate Issuers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666
Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693773
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799105
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