Moody’s drops Eletrobras bond to Baa2

Moody's Investors Service said it downgraded to Ba2 from Ba1 the rating on Centrais Elétricas Brasileiras SA’s (Eletrobras) $1.75 billion global bond that expires on Oct. 21, 2021.

At the same time, the agency assigned a Ba2 corporate family rating to Eletrobras, withdrew its Ba1 issuer rating and lowered the baseline credit assessment to b2 from b1.

The outlook was changed to negative. This concludes the review for possible downgrade that commenced on May 21.

Moody’s said the primary drivers of the downgrade are the financial pressures and execution risk associated with Eletrobras' ambitious capital expenditure program, weak internal cash generation and an expected deterioration in the company's liquidity position.

More specifically, the agency’s projections indicate that Eletrobras will continue to post weak credit metrics over the next 18 months.

Financial performance as measured by funds from operations will remain tepid and not enable the company to meaningfully decrease its high leverage, absent a major reduction in its current capital expenditure program or some sort of capital injection.

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