Moody's rates Duke Paranapanema's floaters A1.br

Moody's Investors Service said it assigned an A1.br Brazil national scale rating and Ba2 global-local currency scale rating with a stable outlook to R$750 million floating-rate debentures to be issued by Duke Energy International Geracão Paranapanema SA.

The assigned ratings apply to senior unsecured non-subordinated debentures to be issued in two series with maturities in 2014 and 2016.

The assigned ratings are at the same level as the Ba2 global Local-currency corporate family rating and A1.br national scale corporate family rating.

Moody's said the ratings could be downgraded if at least 75% of the existing debt with Eletrobras is not repaid from cash flow or refinanced with funds from the rated debenture program or replaced with other senior unsecured debt within 12 months. Duke plans to raise up to R$1 billion in debentures to redeem existing long-term debt with Eletrobras, according to the agency.

The A1.br national scale rating assigned to the debentures reflects the standing of the company's credit quality relative to its domestic peers, the agency said.

Duke's rating reflects the company's solid capital structure characterized by its low level of debt, steady cash generation and profitability, Moody's said.

Unregulated energy contracts expose Duke to potentially lower energy prices and revenue in a scenario where future tariffs decline, which the agency said is unlikely.

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