Moody's lowers AES El Salvador Trust II

Moody's Investors Service said it downgraded the senior unsecured long-term debt rating and corporate family rating of AES El Salvador Trust II to B3 from B2.

The agency also said it changed the outlook to stable from negative.

The company issued a $310 million 10-year senior global notes issue due in 2023 for the benefit of four affiliated electric distribution companies in El Salvador: Compania de Alumbrado Electrico de San Salvador, Empresa Electrica de Oriente, AES Clesa y Compania and Distribuidora Electrica de Usulutan, Moody's said.

These four distribution utilities, which are majority owned by AES Corp., unconditionally and severally guarantee the debt of AES El Salvador Trust II, the agency said.

The downgrade was prompted by the April 13 downgrade of El Salvador government bond rating to Caa1 from B3 with stable outlook, Moody's explained.

The uncertainty to collect the subsidies from the guarantor companies results from challenges faced by the sovereign and the government-owned hydroelectric power generation company, Comisión Ejecutiva Hidroeléctrica, which has historically funded the electric subsidies except for the June through December 2016 period, the agency said.

The B3 ratings and stable outlook acknowledge that the reduced subsidies of about $2.5 million per month, Moody's said.

The B3 ratings also consider the guarantors' combined cash balance at the end of March 2017 of $22 million, the agency added.

The company also has committed not to declare any dividends until gaining clarity on whether they will face material delays in the collection of the subsidies, Moody's said.

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