Fitch stabilizes Wales & West outlook

Fitch Ratings said it revised Wales & West Utilities Ltd.'s outlook to stable from negative while affirming its BBB long-term issuer default rating. The agency also affirmed WWU's and Wales & West Utilities Finance plc's class A senior secured ratings at A- and upgraded their class B subordinated rating to BBB+ from BBB-.

“The stable outlook reflects WWU's strengthened financial profile, supported by deleveraging and leading to comfortable gearing headroom, following the implementation of the new two-tier capital structure in the current 2021-2026 regulatory period (RIIO-GD2).

“The new structure reflects a recently received cash equity injection of about £150 million and an upcoming debt-funded equity of about £200 million from the Wales & West Gas Network Holdings Ltd. (Midco) in financial year ending March 2024, underlining the shareholders' commitment to maintaining WWU's rating,” Fitch said in a statement.

The upgraded subordinated class B rating, which affects two issues of £50 million each due 2026, reflects the improved post-maintenance interest coverage ratio and sufficient gearing headroom against the negative sensitivity, and better recovery prospect after prior-ranking swap liabilities are reduced by the expiry of a £300 million notional this month, Fitch said.

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