Moody’s rates Kallpa notes Baa3

Moody's Investors Service said it assigned a Baa3 senior unsecured rating to the proposed issuance of up to $370 million 10-year 144A/Regulation S senior unsecured notes by Kallpa Generacion SA.

The bullet notes are due in 2026.

The outlook is stable.

Proceeds will be largely used to fund the early redemption of the bulk of Kallpa's outstanding debt estimating $308 million at the end of March 2016, including $45 million of short-term borrowings under an uncommitted working capital credit facility.

Moody’s said the senior unsecured rating reflects the highly competitive position of Kallpa’s 870MW CCGT plant in the Peruvian power market. It also factors the long-term contracted nature of its operations that help to enhance the visibility of its cash flows while also recognizing that over half of its load has been contracted with regulated utilities.

The rating is also predicated on management's commitment to not exceed a maximum debt/EBITDA of 3.5 times on an ongoing basis as well as the assumption that Kallpa will remain free cash flow positive (including dividend payments as per Moody's definition) as the agency anticipates no material capital expenditures (capex) will be pursued over the medium-term.

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