Research - APRIL 23, 2014

Argentinean utilities and infrastructure downgraded

by Drew Campbell

The credit ratings of Argentinas government and several infrastructure and utilities companies have been downgraded by Moody's Latin America Agente de Calificación de Riesgo. "The deterioration in Argentina's credit profile as captured in the rating downgrade has direct implications for the ratings of infrastructure issuers, given that it also expresses the increase of systemic risks for all local credits," Moody's notes. The changes reflects Moody's view that the creditworthiness of these companies are largely linked to the current operating environment and regulatory programs in Argentina, which have increased credit quality uncertainty for companies operating in the country.

Moody's rates more than 10 infrastructure issuers that are either regulated concessions, subject to government regulated tariffs and/or are power generating companies that depend on direct payments from government and the strength of local economies. The downgrade of the national scale ratings for these infrastructure issuers reflects Moody's view that a weaker economic environment and an inconsistent policy environment will negatively impact infrastructure companies' abilities to operate as well as their funding options. The ratings reflect below-average creditworthiness relative to other domestic issuers.

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