S&P lowers Guacolda outlook to negative

Standard & Poor's said it revised the outlook on its BBB- ratings on Empresa Eléctrica Guacolda SA to negative from stable.

The decision follows the company's announcement of a preliminary agreement to obtain up to $390 million of funding to refinance existing debt and finance capacity expansion, the agency said.

The negative outlook is based on the potential deterioration of the company's financial risk profile in the next three years deriving from the expected significant increase of its financial debt, and on the completion risk inherent to any such construction project, according to S&P.

The agency added it expects debt service coverage ratios to deteriorate in that scenario, at least until the new capacity comes online, but it also expects the company to maintain sizable cash reserves and a flexible dividend policy.

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