Moody’s downgrades Light, subsidiaries

Moody's America Latina said it downgraded Light SA’s corporate family rating to B1 from Ba3 on the global scale and to Baa3.br from A3.br on the national scale.

At the same time, the agency lowered the issuer ratings and senior unsecured debentures ratings of its fully owned subsidiaries Light Serviços de Eletricidade SA's (Light SESA) and Light Energia SA to B1/Baa3.br from Ba3/A3.br and to B1/Baa2.br from Ba3/A3.br respectively.

The outlook remains negative for all ratings.

Moody’s said the downgrades and the negative outlook reflect: (a) higher uncertainties surrounding Light's ability to comply with its financial covenants in the next 12 months as its required net debt to EBITDA ratio drops to 3.75 times in December 2016 from 4 times in September and 4.25 times in June; (b) the company's weakening credit metrics evidenced by a CFO pre WC to debt of 15.4% in the LTM to March 2016 compared to 16.6% and 38.9% in 2015 and 2014 respectively; (c) expectations that Light's cash flow generation will deteriorate in the next 12 to 18 months in the absence of a asset sales and/or favorable decision from the regulator on Light's request for an extraordinary tariff review this November; and (d) weaker operating profile compared to peers, characterized by higher non-technical losses, challenging Light SESA's ability to obtain future tariff reviews from the regulator.

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