S&P rates Enersis bank loan BB+

Standard & Poor's said it assigned its BB+ rating to a $500 million unsecured syndicated bank loan and $300 million unsecured notes to be issued by Chile-based electricity provider Enersis S.A.

The company's BBB- corporate credit rating is affirmed. The outlook is stable.

The $500 million loan matures in December 2008. The five-year facility has a 30-month grace period on principal repayments with six semi-annual equal installments of $83.3 million from May 2006 and accrues interest at LIBOR plus 225 basis points.

The bullet $300 million bonds mature in 2013. Proceeds will be used to prepay a senior secured syndicated bank loan outstanding since last May, which will allow Enersis to release the collateral granted as part of the previous transaction.

Enersis' senior unsecured debt is rated one notch below the company's BBB- corporate credit rating, reflecting structural subordination. According to S&P's criteria, when liabilities at the subsidiaries level are sizable regarding consolidated assets, the senior unsecured debt rating of the parent is notched down from the corporate credit rating.

S&P said the ratings on Enersis reflect its solid business position in Chile, offset by the weak performance of its investments in Argentina and Brazil and its relatively weak financial profile. The stable outlook incorporates S&P's opinion that the improvements in Enersis' financial performance and financial flexibility during 2003 have alleviated refinancing risk and should allow it to comfortably comply with its financial obligations.

S&P said any improvement in the outlook or rating would require further improvements of 60%-owned subsidiary Endesa Chile's performance and a more consolidated stabilization of the economic environment in Argentina and Brazil, which would allow Enersis to improve financial coverage ratios well above the current ones.

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