Fitch: Reorg Likely Neutral But Still Uncertain for Enersis and Endesa-Chile's Credit Quality

martes 5 de mayo de 2015 15:34 GYT

(The following statement was released by the rating agency) NEW YORK, May 05 (Fitch) The proposed corporate restructuring recently announced by Enersis S.A. (Enersis, Fitch Issuer Default Rating : 'BBB+'; Stable Outlook), at the behest of parent company Enel SpA (IDR: 'BBB+'; Stable Outlook), is still in its preliminary stages with very few details known at this time. In Fitch's view, the ramifications of the corporate restructuring could be either neutral or negative to Enersis and Empresa Nacional de Electricidad S.A.'s (Endesa-Chile, IDR: 'BBB+'; Stable Outlook) credit profiles. Fitch believes it is too early to complete a full credit analysis of the proposed restructuring and a more complete analysis should be possible once more key data points are available over the next few months given the preliminary nature of the transaction. Fitch will be closely monitoring developments going forward, but outlines high-level considerations that would be neutral or negative to Endesa-Chile and Enersis' credit profiles. Neutral Ratings Considerations Fitch believes the Enersis/Endesa-Chile corporate reorganization would be a credit-neutral event if the cash flow generation profiles of both companies remain relatively in-line with their rating categories following asset movement to the new structure. Fitch will look for the new entities to maintain their current stability and predictability of profits in-line with peers, with structurally neutral-to-positive free cash flow (FCF) across the investment cycle at each entity. One key consideration will be the dividend flow from operating companies to the parent, which is more of a consideration for Enersis's credit profile given its role as a holding company. Fitch will analyze whether the companies' leverage metrics are consistent with 'BBB+' peers and not significantly different from current leverage metrics following the debt redistribution. As of YE2014, Endesa-Chile and Enersis leverage metrics were sound and stable, reporting net debt to EBITDA of 1.5x and 0.8x respectively. From an operational and financial management perspective, it would be credit neutral if both entities continue to display a commitment to maintain a conservative financial policy with comfortable liquidity an well-spread maturity schedules. Negative Rating Considerations The deterioration of the cash flow generation profiles of Enersis and/or Endesa would be viewed negatively by Fitch. In particular, this is a concern as following the reorganization of the entities that encompass Chilean operations are not expected to demonstrate significant growth prospects. This could result in more volatility in terms of the companies' FCF generation versus the current stable positive FCF generation profiles of Enersis and Endesa-Chile. Another negative rating consideration would be if Enersis and/or Endesa-Chile's leverage metrics are not consistent with 'BBB+' peers and significantly differ from current leverage metrics. Negative ratings triggers for Enersis and Endesa-Chile are a sustained deterioration of credit metrics reflected in a debt-to-EBITDA ratio greater than 3x and EBITDA-to-interest coverage below 4x. Finally, key considerations for possible negative rating actions are if the new entities' commercial policy diverges from current policies and results in imbalanced long-term contractual positions. One final possible negative credit rating trigger would be if the new entities experience increased pressure from their shareholders (principally Enel) that could result in a significant increase in dividend payments. Background In a regulatory filing to the Chilean Superintendencia de Valores y Seguros (SVS) on April 27, 2015, Enersis disclosed more details about the potential corporate restructuring of both Enersis and Endesa-Chile). The main result of the corporate reorganization, if approved by all major stakeholders, would be: --Separate out the Chilean and International operations which are currently intermingled, under the 'Enersis Chile' and 'Enersis Americas' umbrellas; --The company's Chilean distribution business (Chilectra S.A.) and generation business (Endesa-Chile) would operate Under Enersis Chile; --The company's generation and distribution businesses in the rest of Latin America would operate under Enersis Americas; --The estimated timeline from approval to a final separation would be approximately 12 months. Contact: Primary Analyst Xavier Olave Associate Director +1-212-612-7895 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Paula Garcia Uriburu Director 56-2-499 3300 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at ''. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (May 28, 2014). Applicable Criteria and Related Research: Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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