Fitch rates Cemig bonds B/RR3

Fitch Ratings said it assigned a B(EXP)/RR3 rating to Cemig Geracao e Transmisao SA’s (Cemig GT) proposed $1 billion senior unsecured Eurobonds due 2024.

The proposed Eurobonds are guaranteed by the holding company Companhia Energetica de Minas Gerais (Cemig) and proceeds will be used to prepay existing debt.

Cemig GT's and Cemig Distribuicao SA's (Cemig D) long-term foreign and local currency issuer default ratings are currently rated B- and the national scale rating BB-(bra).

All the ratings are on negative watch, including the proposed issuance.

Fitch said the ratings reflect Cemig group's deteriorated credit profile, as the agency believes that the company's financial flexibility has materially worsened and net adjusted leverage will be in the range of 5 times to 6 times in the next two years.

Delays in completing its strategy for asset disposal along with significant financial expenses on its debt are having a negative impact on the group's ability to improve its financial metrics, including liquidity ratios,” Fitch said in a news release.

Expected free cash flow of about R$900 million in 2017 and R$100 million in 2018 are viewed as positive.

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