Moody's downgrades Tijuana water utility rating
Moody's has downgraded its rating for Mexico's Tijuana water utility in Baja California state, CESPT, from A1.mx to A2.mx with a negative outlook, according to a report from the ratings agency.
Moody's also downgraded CESPT's debt ratings on a 280mn-peso (US$21.66mn) loan from Banorte from Ba1 to Ba2.
The downgrade was triggered by the recent downgrade of the Baja California state government's issuer rating from Baa1 to Baa2 and CESPT's ties with the state and the latter's role in the decisions of the company's management.
The deterioration of CESPT's operating margins (negative in both 2011 and 2012) and high debt levels has weakened the utility's credit profile.
In Moody's opinion, "achieving positive operating margins in the near-to-medium term will remain a major challenge," according to the report.
The outlook could be revised upwards "if operating margins substantially increase, debt and liquidity levels stabilize, and if the outlook on the rating of the state of Baja California returns to stable."
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