Wednesday, October 24, 2007

Enel and Endesa senior unsecured ratings cut from A plus to A minus

Fitch Ratings said it has cut Enel SpA and Endesa SA's senior unsecured rating to 'A' from 'A+', long-term issuer default rating to 'A-' from 'A' and short-term IDR to 'F2' from 'F1'.

The outlook on Enel and Endesa's long-term IDR is negative, the ratings firm said.

The rating actions follow last week's closing of the tender offer by Enel and Spanish construction company Acciona for the remaining 54 pct stake in Endesa. Enel and Acciona now hold 67 pct and 25 pct in Endesa respectively.

Fitch said the downgrade of Enel's ratings reflects its weakening financial profile, with leverage of the combined group -- including Endesa -- measured as net debt to EBITDA initially above 4 times.

Enel's funds from operations to net debt is likely to remain below 20 pct in the next few years, Fitch said.

Fitch said the downgrade also reflects Enel's growing exposure to more volatile markets, including its recent involvement in the Russian energy sector, where it plans to gain control of power generator OAO OGK-5 by increasing its current holding of 30 pct.

The negative outlook on Enel's long-term IDR reflects challenges to jointly control and manage Endesa with Acciona, also taking into account the possible complexities of the shareholder agreement, the ratings agency said.

Here is the full article.