Moody's downgrades Metrogas

Moody's Latin America said it downgraded Metrogas, SA's corporate family rating to Caa3 from Caa2, national scale rating to Caa3.ar from Ba1.ar and senior unsecured foreign-currency rating to Caa3 from Caa1.

This concludes the review for possible downgrade that began May 28, and the outlook is negative.

The agency said the downgrade considers Metrogas' continued weak liquidity relative to its debt maturity profile. Metrogas' tariffs have remained frozen and inflation continues to erode margins and cash flow generation, Moody' said, and the peso devaluation has increased the size of interest payments and upcoming principal payments associated with Metrogas' dollar-denominated debt.

The negative outlook reflects the increased likelihood that Metrogas will need to restructure its debt obligations given the company's weak liquidity profile, poor internal cash generation relative to internal funding requirements and the lack of a clear strategy to address the debt maturities that begin in 2010, Moody's said.

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