MONTERREY--(BUSINESS WIRE)--Fitch Ratings has upgraded Comision Federal de Electricidad's (CFE) ratings as follows:
--Long-term foreign currency (FC) Issuer Default Rating (IDR) to 'BBB+' from 'BBB';
--Long-term local currency (LC) IDR to 'A-' from 'BBB+';
--USD1 billion senior notes due 2021 to 'BBB+' from 'BBB';
--USD750 million senior notes due 2042 to 'BBB+' from 'BBB'.
Fitch has also affirmed the following ratings:
--National scale long-term rating at 'AAA(mex)';
--Local Certificados Bursatiles Issuances at 'AAA(mex)';
--National scale short-term rating at 'F1+(mex)';
--Senior unsecured short-term peso program at 'F1+(mex)'.
The Rating Outlook is Stable.
KEY RATING DRIVERS:
These ratings actions follow Fitch's upgrade of the United Mexican States' (UMS) FC IDR to 'BBB+' from 'BBB' and its LC IDR to 'A-' from 'BBB+'. The upgrade of the sovereign's credit ratings reflects its strong macroeconomic fundamentals, including the absence of macro-financial imbalances, consistent adherence to its inflation targeting and flexible exchange rate regimes, as well as the greater than anticipated commitment of the new administration and Congress to pass structural reforms. Moreover, the resilience of the economy is supported by the stabilization of oil production and progress in addressing drug-related violence, albeit still remains high.
CFE's ratings reflect the company's position as the largest electricity generator in Mexico. Also reflected are CFE's strong linkage with and strategic importance to the Mexican government and the government's implicit support. CFE's foreign and local currency IDR ratings are at the same level as Mexico's sovereign rating. CFE is a decentralized public entity of the Mexican federal government and also has exclusive rights for the transmission and distribution of electricity, which makes it strategically important for the country. CFE's ratings also incorporate the risk of political interference.
RATING SENSITIVITIES
Factors that could pressure the ratings are a UMS ratings downgrade, a substantial increase in leverage to finance Capex, and/or sharp and extended equity erosion with lack of government support.
Positive factors to credit quality are a UMS ratings upgrade, increased financial support from the government, significant improvement in credit profile, and/or an extended generation of positive free cash flow.
For more information on CFE please refer to the press release published May 6, 2013.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);
--'Rating Latin American Utilities, Power, Gas, and Water Companies' (July 27, 2011);
--'National Rating Criteria' (Jan. 19, 2011).
Applicable Criteria and Related Research
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552
Rating Latin American Utilities, Power, Gas, and Water Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=644949
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=791117
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