Standard & Poor's Maalot Ltd. today gave Israel Electric Corporation (IEC) (TASE: ELEC.B22) bonds a AA- rating with a "Negative" outlook, citing the utility's worsening liquidity. Maalot also put the bonds on its credit watch, implying a future rating downgrade. The AA- minus rating is based on government backing of IEC's bond debt, which totals NIS 65 billion.
Maalot says that IEC's liquidity is "less than adequate." It adds that IEC's liquidity is under pressure, due to the shortage in supplies of natural gas from Egypt, and the dwindling Yam Tethys reserves in Israel, which forces the company to consumer more expensive fuels.
"We believe that, even though the Israeli government is implementing a support package for IEC, this support package will increase the debt burden of the company, which has not yet succeeded in finding a long-term solution to fully repaying its costs and permanent strengthening of its weak liquidity position."
Maalot notes that IEC has officially said that it will need an addition NIS 3-3.5 billion in bridge financing from the government to cover the cost of fuel until the public bond offering this summer. It warns of a downgrade of two notches in IEC's bond rating.
Published by Globes [online], Israel business news - www.globes-online.com - on April 5, 2012
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