Moody’s rates Pampa Energia, notes B3

Moody's Investors Service said it assigned a B3 corporate family rating to Pampa Energia SA and a B3 rating to its proposed long term senior unsecured notes.

Proceeds from the notes will be used to refinance debt and for capital investments as well as other general business purposes.

The outlook is stable.

Moody’s said the B3 ratings assume a successful merger of Petrobras Argentina SA (B3 developing) into Pampa, expected to be finalized in the first quarter of 2017.

“From one side, the ratings consider Pampa's negative free cash flow, although fueled by expansionary capex in natural gas and power projects, which have favorable prospects; low interest coverage and low retained cash flow compared to total debt, pro forma for the proposed notes; as well as exposure to volatile, highly regulated power and oil and gas industries in Argentina,” the agency said in a news release.

“On the other hand, these factors are mitigated by the company's strategy to focus on businesses with positive pricing outlooks, namely natural gas production and power generation; the expected stable demand for electricity and strong demand for natural gas in Argentina; as well as low foreign exchange risk.”

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