S&P drops Metrogas to CCC+

Standard & Poor's said it lowered the corporate credit rating on Metrogas SA to CCC+ from B-.

The outlook is negative.

The downgrade is mainly based on the company's weakening financial risk profile deriving from increasing operating and financial costs and debt levels amid tariff freeze, inflation and peso devaluation, according to the agency.

Ratings reflect the high political and regulatory risk in Argentina, its high leverage and the significant mismatch between the company's revenue in Argentina pesos and debt in foreign currency, the agency said.

Metrogas' good competitive position as Argentina's largest distributor of natural gas partially offset these factors, the agency noted.

The issuer's debt-to-EBITDA ratio deteriorated to 5.1x in the 12 months ended on March 31, from 4.4x for the same period in 2008 as a result of lower operating results mainly due to higher operating costs and debt levels, caused by the peso devaluation, S&P said.

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