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Fitch maintains its rating for Canal de Isabel II based on its financial solvency and liquidity - Fitch maintains its rating for Canal de Isabel II based on its financial solvency and liquidity

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angle-left Fitch maintains its rating for Canal de Isabel II based on its financial solvency and liquidity

Fitch maintains its rating for Canal de Isabel II based on its financial solvency and liquidity

2019-06-26

Despite the event of default, no bondholders have requested early repayment of any bonds in their possession


The agency maintains as BBB + with a stable outlook the rating of Canal de Isabel II


Fitch has revised its rating for Canal de Isabel II following the company's decision to resume dividend distribution to its shareholders, previously approved in the amount of 128 million, given its impact on the liquidity position with respect to potential early redemption of the entire 500 million euro bond issue. The agency considers that full bond redemption is a remote scenario and that the company’s financial solvency and liquidity would allow it to cover this situation if necessary.

In accordance with the terms of the prospectus for the bond, issued by Canal de Isabel II in February 2015, an event of default was triggered as a result of the precautionary measure taken by the Colombian Office of the Public Prosecutor on 4 October 2018 to seize the shares that Inassa holds in Triple A de Barranquilla. The public company reaffirms that, as of today and after more than 8 months, it has received no demands from bondholders for early repayment.

This position is reflected in the Annual Financial Statements for fiscal year 2018, approved at the General Meeting of Shareholders on 8 May 2019, and was reported as relevant information to the National Securities Market Commission at the end of 2018.

Canal de Isabel II again confirms that it has sufficient liquidity to cover the early redemption of the entire bond issue, if necessary, given its financial solvency.

In this regard, the company has a contingency plan in place to cover the repayment of the bond issue, which is structured as follows:

-           cash and cash equivalents available in the amount of 270 million euros;

-           undrawn credit facilities in the amount of 122 million euros;

-           additional uncommitted credit facilities approved by the company's Board of Directors in the amount of 170 million euros.

Fitch does not view the uncommitted credit facilities - which have not been formalised in order to avoid a commitment fee - as eligible for liquidity purposes under their criteria, and therefore considers that the decision to resume dividend distribution does not reflect a sufficiently conservative liquidity policy for an A- rating.

Fitch has affirmed its final IDR rating for Canal de Isabel II at BBB+, with a stable outlook, with its rating case based primarily on its expectation that full bond redemption is a remote scenario. The agency considers that Canal would have the ability to ultimately raise sufficient funds to repay the 500 million euro bond in whole, if necessary, based on its current liquidity position, as well as its long and well-established relationships with banks, low business risk, low leveraged capital structure and highly cash-generative business.

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