Fitch cuts AES El Salvador bond to BB+

Fitch Ratings said it downgraded AES El Salvador Trust's foreign- and local-currency issuer default ratings to BB+ from BBB-. The action applies to the $300 million 6 ¾% Political Risk Protected bond issuance due in February 2016. Fitch also said it downgraded the bond issuance's national scale rating to AA(slv) from AAA(slv).

The outlook is negative.

The action reflects the company's increased exposure to political interference and regulatory uncertainty, as well as the recently implemented tariff reduction, which has increased leverage and business risk, Fitch said.

The growing difference between controlled prices and the higher cost of electricity holds the potential to create large market imbalances and make adequate rate increases in the future more difficult to accomplish should government subsidies be reduced or eliminated, the agency said.

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