Fitch Ratings: ELPA Default Further Constrains Eletropaulo.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 3, 2003 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. international and Brazilian national scale credit ratings of Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A.'s (Eletropaulo) remain unchanged at 'DDD' following the default by its holding company, AES ELPA ELPA Educational Leadership and Policy Analysis ELPA English Language Proficiency Act ELPA Entry Level Professional Accountant ELPA Eyring Low Profile Antenna ELPA Extra Low Profile Antenna ELPA Extended Link Pack Area S.A. (ELPA), on US$85 million due to Brazil's National Bank for Economic and Social Development (BNDES BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brazilian Development Bank) BNDES Banco Nacional de Desenvolvimento Econômico e Social (Brasil) ). The schedule payment, previously deferred from Oct. 15, 2002 until Jan. 31, 2003, is part of the financing arrangement employed by ELPA to acquire the common shares of Eletropaulo. As a result of a the default by ELPA and cross default provision in the BNDES loan agreement with Eletropaulo, BNDES also now has the right to call due approximately US$231 million loaned to Eletropaulo related to the rationing recovery program. Fitch believes it is unlikely that BNDES will call the loan at Eletropaulo as other lenders would be prompted to do the same, potentially resulting in an Eletropaulo bankruptcy; a bankruptcy could result in Eletropaulo losing the electricity distribution concession which would impair potential recovery rates. Eletropaulo remains in payment default on US$18.7 million of remaining Euro commercial paper that was due in December 2002 and was in technical default on a number of its bank loans related to violation of financial covenants, although no loans have been accelerated, at the moment. Fitch does not expect Eletropaulo to be able to meet its upcoming debt maturities absent a restructuring of its other bank loans under similar terms of its JP Morgan syndicated loan Syndicated Loan A very large loan in which a group of banks work together to provide funds for one borrower. There is usually one lead bank that takes a small percentage of the loan and syndicates the rest to other banks. Notes: Also known as a "syndicated bank facility. . The company has said its intention is to honor 100% of its obligations, but Eletropaulo's refinancing options are currently limited to rolling over a significant portion existing local and international bank transactions and commercial paper given the company's liquidity and AES management's intention to not invest additional funds into Brazil. Combined debt at ELPA and AES Transgas - Eletropaulo's other holding company - which totals US$1.16 billion is secured by the respective common and preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Eletropaulo and could result in The AES Corporation AES Corporation AES (NYSE) is a Fortune 1000 company that generates and distributes electrical power. It was founded on January 28, 1981 by Roger Sant from the US Federal Energy Administration and Dennis Bakke from the Office of Management and Budget. (AES) losing control of the Brazilian distributor. Although no restructured financing arrangement or extension has been reached with BNDES and its new management, it is unlikely BNDES would want to or be able to liquidate its collateral position. Eletropaulo is the largest electricity distributor in Latin America in terms of revenues, with a sales volume of 32,563 GWh in 2001. Since privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned on April 15, 1998, Eletropaulo has been owned by LightGas, now known as AES ELPA S.A. (ELPA). ELPA is 88.21% owned and controlled by AES. Also, ELPA owns 77.81% of Eletropaulo's voting shares Voting Shares Shares that give the stockholder the right to vote on matters of corporate policy making as well as who will compose the members of the board of directors. Notes: Different classes of shares, such as preferred stock, sometimes don't allow for voting rights. and 30.97% of total capital. |
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