Fitch puts Aegea on watch

Fitch Ratings said it placed the BB ratings for Aegea Saneamento and its senior unsecured bond due 2024 issued by Aegea Finance Sarl and guaranteed by Aegea on rating watch negative. Fitch also placed Aegea and subsidiaries' national long-term ratings of AA(bra) on watch negative.

The watch negative reflects the potential leveraging from the acquisition of two blocks (water utilities) from the state of Rio de Janeiro's Cedae. Aegea is part of a consortium that will hold the assets in two special purpose vehicles. Fitch said it estimates Aegea's equity contributions manageable at about R$2 billion-R$2.2 billion funded over a couple of years.

“Aegea will also sign an equity support agreement (ESA) that effectively guarantees a portion of the bridge debt at the SPVs level, which could significantly increase leverage if fully called upon. The Watch Negative will likely extend beyond six months to increase visibility on the SPVs financial condition and to evaluate the likelihood of additional parent support to the SPVs,” the agency said in a press release.

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