S&P affirms Isa Capital

Standard & Poor's said it affirmed ISA Capital do Brasil SA's BB+ corporate credit rating and its BB rating on the $554 million senior unsecured notes in two tranches.

The outlook is stable.

ISA Capital is a special-purpose financing entity that issued the bonds and lent the funds to Interconexión Electrica SA ESP (foreign-currency BB+/stable; local currency BBB-/stable), which used the debt to finance the acquisition of Companhia de Transmissao de Energia Elétrica Paulista in 2006.

The affirmation reflects the challenges that ISA Capital faces in operating in Brazil's economic and political environment, the foreign exchange risk and the refinancing problems associated with the bullet structure payment, the agency said.

Offsetting factors are stable regulatory environment for transmission companies in Brazil the past decade, the company's satisfactory business risk profile, strong cash flow generation and structure that includes a debt-service reserve account covering six months of interest payments, S&P said.

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