Moody’s rates ENTE debt Baa3/Aa1.br

Moody's America Latina Ltd. said it assigned a Baa3 rating on the global scale and an Aa1.br rating on the national scale to six-year amortizing R$248 million senior unsecured debentures to be issued by Empresa Norte de Transmissao de Energia SA (ENTE) in the local market.

At the same time, the agency affirmed ENTE's Baa3/Aa1.br issuer ratings as well as its existing R$190 million debentures issued in February 2011 with an outstanding balance of R$93.5 million as of Dec. 31, 2013.

The outlooks are stable.

The new debentures will amortize in quarterly installments after a two-year grace period for the payment of principal and a six-month grace period for the payment of interest. A major financial covenant embedded in the debenture indenture defines the maximum debt level that ENTE can incur at R$560 million through February 2020 and 50% of this amount after this date, which includes the company's consolidated debt.

Proceeds will be used for working capital purposes including the injection of capital in two small transmission companies, which Moody's estimates will be around R$97 million.

Moody’s said the Baa3 and Aa1.br issuer ratings reflect the company's stable and predictable cash flow. The cash flow is supported by the long-term regulated concession agreement ENTE signed with the Federal Government to operate an electricity transmission network in the northern portion of Brazil, which does not expire until December 2032. The relatively long track record of operations, management's expertise in the transmission business and the company's strong credit metrics further support the ratings, the agency said.

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