Moody's assigns BR-2 ratings for Bandeirante Energia notes
Bnamericas Published: Wednesday, March 19, 2003
Credit rating agency Moody's Investors Service has assigned its BR-2 rating for 200mn reais of 180-day promissory notes to be issued by Brazil's Sao Paulo state-based distributor Bandeirante Energia. Bandeirante plans to pay interest at 112% of the CDI key interbank rate on the notes (about 29% a year at today's rates), a Bandeirante spokesperson told BNamericas. The placement is expected within the next few days, but the spokesperson would not confirm this. The proceeds will be used to refinance dollar-denominated debts, the spokesperson said. Moody's also issued Ar.br Brazilian national scale issuer rating and Ba3 global local currency scale issuer rating to Bandeirante, and added that the outlook is stable for all Bandeirante ratings. The ratings reflect "an issuer with above average creditworthiness relative to other Brazilian issuers," Moody's said. This decision reflects Bandeirante's status as an "essential service provider" in a relatively wealthy service area in the state of Sao Paulo and incorporates expected substantial improvements in Bandeirante's retained cash flow as a result of distribution tariff increases and operational cost reductions. The ratings also reflect the company's policy of fully hedging its foreign currency debt; expected productivity improvements resulting from the company's ongoing investments in modernization of its network and operational and commercial systems; maintenance of the current moderate level of capital expenditures as a percentage of revenues; and the company's intention to use proceeds from the promissory note issuance to fully amortize all outstanding bank credit lines. An analysis of Bandeirante's liquidity finds that approximately half of its outstanding debt is held by parent company EDP Brasil, and that provisions in the promissory note indenture allow for the restructuring of this debt without a default event. In addition, the anticipated refinancing of the promissory notes with a mandated US$100mn Inter-American Development Bank (IDB) loan would improve the company's liquidity profile. The A-Loan component (US$38.9mn) of this facility is to be fully funded by the IDB, and management expects to receive this financing by July 2003. Moody's said. Bandeirante has some 1.3 million customers and total electricity consumption of 10.2 million kWh in its concession area in the east of Sao Paulo state.
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