LIGHT SA
Fitch has downgraded the Local Currency and Foreign Currency Issuer Default Ratings (IDRs) of
Fitch has also downgraded the National Scale Ratings of these entities to 'CCC(bra)' from 'AA-(bra)'. The ratings of foreign currency and local currency debt instruments were downgraded to 'CCC+'/'RR4' and 'CCC(bra)'.
The downgrades reflect substantial credit risk for Light in making timely payment of principal and interest on its obligations following the announcement that it had hired Laplace Financas with the purpose to improving its capital structure and the more restrictive credit market due to Americanas' default. The confluence of these factors substantially reduces the group's ability to raise financing needs to support its expected negative FCF and debt amortization. Prior to these recent developments, Fitch expected Light to raise up to
Key Rating Drivers
Potential Debt Restructuring: To avoid a restructuring in the midst of a challenging backdrop, Light will need to maintain access to bank or capital market funding. In the absence of additional funding, the company will need some combination of asset sales, a follow-on equity offering, or more clarity on the renewal of the concession of
Americanas' recent judicial recovery may also play a role in the group's ability to raise debt, as several lenders suffered material losses. The potential effect upon Light's ability to refinance debt due to the uncertainty surrounding the renewal of
High Refinancing Needs: Fitch has concerns about Light's ability to secure funding. The agency had estimated that the group would raise up to
Moderate Consolidated Leverage: Light's consolidated adjusted leverage should remain at moderate levels, despite being moderate to high at
Debt Ratings Capped: Fitch applies a bespoke approach to recovery for issuers rated 'B+' and lower, using the higher of going-concern and liquidation estimates to enterprise valuation. In the case if Light, Fitch forecasts recovery rates commensurate with an 'RR1' for secured debts (
However, Fitch's 'Country-Specific Treatment of Recovery Ratings Criteria' caps at 'RR4' the recovery for debt instruments in
Derivation Summary
Light's accessibility to capital has significantly weakened its credit profile, as reflected in the downgrade. The company faces credit risks similar to those of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Light maintains its ability to receive funding from banks or the capital market;
The group sells assets or raises equity in a follow-on issuance;
Renewal of
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The announcement of a debt restructuring plan;
Insufficient liquidity to cover funding requirements over the next 12 months.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Heightened Refinancing Risk: Light's ability to secure funding in the short term is uncertain. At the end of 3Q22, Light reported
Issuer Profile
Summary of Financial Adjustments
Remuneration of concession's financial asset not included in EBITDA calculation;
Construction revenues and costs excluded from the Income Statement.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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