Home Local News GDB: Prepa ratings won’t hit bonds
Issued : Wednesday, March 28, 2012 06:35 PM
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GDB: Prepa ratings won’t hit bonds

By CB Online Staff

Downgrades by credit rating agencies should not have a big impact on the Puerto Rico Electric Power Authority’s planned $475 million bond issue, Government Development Bank officials said Wednesday.

“We don’t see this impacting the transaction. All of the ratings are essentially at parity,” José Otero, GDB vice president of financing, told CARIBBEAN BUSINESS.

Two major credit rating agencies made moves on the Prepa bonds on Wednesday. Moody’s Investors Services lowered its rating from A3 to Baa1. Fitch Ratings affirmed its BBB+ grade, but revised the outlook to negative from stable.

“The Outlook revision to Negative reflects slimmer operating margins and cash flow in fiscal 2011 and prospectively, due to the effects of ongoing economic recession, escalated fuel costs, declining electricity usage, mounting accounts receivable and the authority's reluctance to increase electric base rates,” Fitch said.

Last week, Standard & Poor’s affirmed its BBB- rating.

Otero said that the island’s high dependence on oil to produce power as a key driver in the downward shifts. He added that the ratings agencies cited Prepa’s plan to diversify away from petroleum toward natural gas as a strong credit positive.

“They see Prepa moving in the right direction,” he said.

Proceeds from the $475 million bond issue will go toward paring Prepa’s debt and capital works.

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