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Fitch Ratings Comments On MetroGas' Interest Payment.

Business Editors


Fitch Ratings views the announcement by MetroGas S.A. that it paid all of the interest accrued on its financial obligations since April 30, 2002, as a strong indication of management's commitment to apply any excess cash flow to fulfill its financial obligations. The payment, covering bank and capital market debt, was funded by the early cancellation of a currency swap due in September 2002. The termination generated an estimated US$13.2 million for the company.

Funds were distributed as follows: i) series A notes: US$5.7 million, including US$4.9 million due on April 4 and US$800,000 accrued as of April 30; ii) series B notes: EUR4.8 million, not yet due; iii) series C notes: US$1.4 million, due May 5, iv) foreign bank debt: US$2.3 million. Following these payments, MetroGas remains in default on interest obligations for the series C notes totaling US$2.5 million, and bank debt for US$1.7 million. On April 2, 2002, Fitch placed MetroGas' rating in default, following the company's missed interest payment under its US$100 million series A notes.

Regulated market participants, including MetroGas, have been trying to negotiate revenue recovery mechanisms to offset the effective expropriation of value following peso-fication and the suspension of regulated tariff adjustments. The central objective of these negotiations is first and foremost, to ensure sufficient cash flow generation to fund ongoing operations, and second, if possible, to afford a balance to service existing debt obligations. These negotiations, however, have been slow and yielded little in the way of meaningful benefits. No material negotiations have occurred since the new Minister of Economy was appointed in May 2002. As a result, Fitch believes that no material tariff relief will come until after the March 2003 elections and even then only after the new administration has completed a review of the situation. Thus, any workable plan with the government is at least 12 months away. Fitch believes that MetroGas will not be in a position to restructure its debt until a new tariff scheme is approved and the medium-to-long-term cash flow of the company can be adequately estimated.

MetroGas is the largest of eight natural gas distribution companies. MetroGas is 70%-owned by Gas Argentino S.A., 10%-owned by employees and 20% is traded in the Buenos Aires Stock Exchange. Gas Argentino S.A. is a consortium composed by British Gas PLS (54.7%), and Repsol-YPF (45.3%).
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Comment:Fitch Ratings Comments On MetroGas' Interest Payment.
Publication:Business Wire
Geographic Code:3ARGE
Date:Aug 14, 2002
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