Moody’s revises Edenor view to negative

Moody’s Investors Service said it changed Empresa Distribuidora y Comercializadora Norte SA’s (Edenor) outlook to negative from stable and affirmed its Caa3 corporate family and senior unsecured ratings. Concurrently, Moody’s affirmed Pampa Energía SA’s Caa3 corporate family and senior unsecured ratings, with a stable outlook.

The action follows Pampa’s report it is selling its controlling interest in Edenor for $95 million in cash and stock to Empresa de Energía del Cono Sur SA, the agency said.

Pampa will receive $5 million in cash seven days after the announcement of the transaction; $50 million at the closing date, and $40 million at the first anniversary of the closing plus a payment in kind of 21,876,856 class B shares, representing 2.41% of the capital stock and voting rights of Edenor. The sale is subject to regulatory and Pampa’s shareholders’ approvals.

Pending approvals, the transaction will trigger a change of control offer to Edenor’s bondholders that will require the repurchase of the $98 million outstanding of notes. Edenor’s cash position equivalent to $105 million could allow for the notes’ cash payment. However, Argentine central bank foreign-currency restrictions could complicate the change of control repurchase. “This risk along with the uncertainties on how the CoC offer will be handled by the new owners is reflected in the revision of Edenor’s rating outlook to negative,” Moody’s said in a press release.

Edenor’s outlook also incorporates the potential for a protracted period of weak cash flow generation resulting from the regulator’s extension until at least March of the tariff freeze and the government’s recent announcement to review tariffs during 2021 that could result in an extended period of frozen tariffs, the agency said.

© 2015 Prospect News.
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