S&P: HQI Transelec on watch

Standard & Poor's said placed its A- ratings on HQI Transelec SA on CreditWatch with negative implications after Hydro Québec International Inc. announced that it had reached an agreement to sell its 92% stake in Transelec to a consortium led by the Canadian investment firm Brookfield Asset Management Inc. (A-/stable/A-2) for C$1.7 billion.

S&P noted that the negative CreditWatch listing reflects concerns about the potential weakening of Transelec's already-weak financial risk profile for the rating category, deriving from additional debt that the new owners could add to the company to partially finance the transaction.

Transelec's capital structure would deteriorate not only if there were higher debt at Transelec's level, but also if the additional debt were at a direct holding company level without a very strong ring-fencing protecting Transelec's credit quality, the agency said.

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