Fitch changes Sabesp to negative

Fitch Ratings said it affirmed Companhia de Saneamento Basico do Estado de Sao Paulo's (Sabesp) foreign currency and local currency issuer default rating at BB+ and its national long-term rating at AA(bra).

The outlook was revised to negative from stable.

Fitch said the outlook revision reflects Sabesp's challenging scenario that makes it uncertain that the company can report credit metrics in line with the current ratings in 2014 and 2015.

The agency estimates a relevant reduction in Sabesp's cash flow generation at least in 2014 as a result of a severe rainfall shortage coupled with the company's decision to postpone to December 2014 the 5.4% tariff increase implementation as approved by the regulator on the conclusion of tariff revision. The tariff increase has been authorized as in effect since May 1. The deteriorated financial profile should improve as soon as hydrological conditions return to normal standards, Fitch said.

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