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Bond Market News
Guacolda Energia Downgraded To B+ From BB-
June 2, 2021
Guacolda Energia S.A.’s ratings have been downgraded to B+ from BB- by S&P Global Ratings and its ratings have been placed on CreditWatch with a negative implication. The downgrade was driven by higher cash volatility expectations, given that Chile aims to phase out coal and transition to cleaner sources by 2040. S&P predicts lower variable costs and a reduction in spot prices and believes that Guacolda’s contracts might not be renewed at maturity or renewed under less-favorable conditions, including shorter tenors, lower prices and no indexation to the coal price. Guacolda’s current contract average tenor is at 3.3 years, compared to 4 years in 2020. S&P said that it therefore predicts weaker business conditions and more volatile profitability and cash flow generation in the coming two years. Based on this, S&P revised Guacolda’s business score to weak from fair. The CreditWatch placement suggests a 50% probability of a further downgrade within the next three months.
Guacolda´s USD bonds were slightly up. Its 4.56% 2025s up .22 to 75.489, yielding 12.71%.
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