Moody’s Investors Service has assigned a Baa2 rating, with a stable outlook, to Empresas Publicas de Medellin E.S.P.’s (EPM) “global Colombian peso notes due 2027” to be issued in the equivalent amount of up to $1.0 billion USD. This rating aligns with the New York-based rating agency’s Baa2, and stable, rating for the Medellín-owned utility company.
In its assessment, Moody’s stated that the proceeds of EPM’s issuance, which will be issued in Colombian pesos but are settled in U.S. dollars, will go toward refinancing some of all of the public utility’s $1.0 billion USD syndicated club deal loan due in 2020.
“Following the transaction, EPM’s total debt average life will extend to almost 6.5 years from the current 5.2 years,” stated Moody’s in its statement. “While settlement of the debt will be in U.S. dollars, the local currency denomination of the debt will reduce EPM’s exposure to dollar-denominated debt from the current level of 31% to 22%.”
Though it does not expect significant changes in the terms of the issuance, Moody’s did highlight that its rating assignment is based on preliminary documentation about EPM, which maintains 3,680 megawatts of net installed production capacity, the vast majority of which comes from hydropower.
“The transaction indenture does not encompass financial covenants, although the notes will include typical limitations on the occurrence of secured debt and/or sale-leaseback transactions,” stated Moody’s. “The issuer is, however, subject to meeting financial covenants established in other senior unsecured financing, including EBITDA/interest expense of 3.0x and debt/EBITDA of 3.5x.”
(Photo credit: Empresas Publicas Medellín, EPM)