Fitch Rates Emcali and TermoEmcali Funding Corp.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has withdrawn the 'D' rating on the defaulted debts of Empresas Municipales de Cali (Emcali) and on the 10.125% senior secured notes due 2014 (the 'existing senior secured notes') of TermoEmcali Funding Corp. Fitch has also assigned an issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) of 'CCC' to Emcali; the Outlook is Stable. Upon satisfaction of the conditions for the effectiveness of the proposed exchange offer, Fitch expects to assign a 'CCC' rating to TermoEmcali Funding Corp.'s senior secured notes due 2019 (the 'restructured senior secured notes'). The rating actions on Emcali are grounded primarily on Emcali's successful restructuring of its financial obligations. Under the restructuring agreement approved by Emcali's creditors in 2004, the outstanding debts were reordered in four tranches. Tranche A amounts to approximately US$231 million, representing 60% of the debt owed to creditors excluding the Government of Colombia, and is to be repaid in Colombian pesos over 10 and 1/2 years. Tranche B, consisting of 40% of the debt owed to creditors, excluding the Government of Colombia, has already been fully repaid. Tranche C amounts to approximately US$11 million, constituting obligations with Emcali's labor unions labor union: see union, labor. , and will be repaid in Colombian pesos over five years beginning in 2006. Tranche D amounts to approximately US$106 million, consisting of debts owed to the Government of Colombia, and will be paid in Colombian pesos over a period of at least 20 years. As the debts rank pari passu [Latin, By an equal progress; equably; ratably; without preference.] Used especially to describe creditors who, in marshalling assets, are entitled to receive out of the same fund without any precedence over each other. PARI PASSU. By the same gradation. and enjoy no collateral, Fitch views them as unsecured debts Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. of Emcali. However, Tranche D is paid, in effect, sequentially after Tranches A, B, and C are fully repaid, as a grace period with respect to principal extends from 2003 through the full repayment of the other tranches. In addition, as part of the restructuring of TermoEmcali I S.C.A. E.S.P. (Termo Emcali) and to replace the purchase power agreement (PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia ) between Emcali and TermoEmcali, the Tranche E obligation is to be issued to and will benefit TermoEmcali. Payments to be made to TermoEmcali on the Tranche E obligation will match the principal and interest payments due on the restructured senior secured notes. In its cash flow forecast, Emcali expects that payments under Tranche D will be made beginning in 2014, concurrently with Tranche E payments. However, under the Emcali restructuring agreement, the term of Tranche D may be extended up to 10 years if the tranche is not fully repaid in the initial 20-year term. The 'CCC' issuer rating also considers that despite the full repayment of Tranche B, leverage remains high in both absolute terms (Alg.) such as are known, or which do not contain the unknown quantity. See also: Absolute and relative to its ability to generate cash flow. The relationship of debt to EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become has improved in the last two years but remains at a high level of approximately 7.2 times (x). Likewise, debt service margins are projected to run at or near the breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations level of approximately 1.2x in 2006 and 1.0x in 2007. In the near to medium term, Emcali will face significant challenges, including operating cost reductions, power and water losses resulting from faulty infrastructure, and low collections. Conversely, Emcali enjoys a favorable monopoly position in Colombia's third largest metropolitan area, providing power, water, wastewater, and telephony services. Upon satisfaction of the conditions to the effectiveness of the exchange offer and upon counsel's review of the supporting documentation, Fitch expects to assign a 'CCC' rating to TermoEmcali's restructured senior secured notes for up to US$139.6 million. All of TermoEmcali's noteholders have agreed to tender the existing senior secured notes in exchange for the restructured senior notes. The PPA, which provided the source of repayment for TermoEmcali's existing obligations, will be terminated, and a new tranche of notes (Tranche E) will be issued by Emcali to TermoEmcali. The repayment of the restructured senior secured notes will depend, essentially, on Emcali's satisfaction of its obligations under Tranche E. The rating also anticipates that payment to the senior creditors of TermoEmcali will occur by releasing the funds that have been accumulating in an offshore account since the end of 2004. Taking into account scheduled interest and principal payments not made in 2004, noteholders are expected to be paid US$34 million this year. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the terms of the restructuring, the present value of payments of the Tranche E notes at an 8.3% discount rate is limited to US$164.6 million, plus US$8.7 million that was already deposited into the escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. account. In conjunction with the exchange offer and restructuring of TermoEmcali, outstanding amounts payable by TermoEmcali to Emcali will be capitalized as additional equity of Emcali in TermoEmcali. Consequently, Emcali's participation in the equity of TermoEmcali will rise from 43% currently to 88.37% upon consummation of the exchange offer. The TermoEmcali project consists of a 231.9 MW gas-fired power plant located 10 kilometers outside the City of Cali. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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