The rating outlook is negative. Following this rating action all ratings will be withdrawn, Moody’s said in a statement.
“The two-notch downgrade of Hidroelectrica’s ratings to Caa1 follows the confirmation of the company’s voluntary insolvency filing by the Bucharest Court on 20 June 2012,” said Richard Miratsky, a Moody’s Vice President — Senior Analyst and lead analyst for Hidroelectrica.
“The Caa1 rating reflects significantly increased payment default risk and the inherent unpredictability of future developments under the insolvency proceedings,” Miratsky added.
This is the second rating action taken by Moody’s since Romania’s largest energy producer Hidrolectrica announced it has filed for insolvency on June 20. Following the announcement, the rating agency cut Hidrolectrica’s ratings by four notches from Ba1.
“The negative outlook on the rating reflects the risk that the insolvency process might initiate the acceleration of debt maturities above the company’s repayment capacity and significantly hinder arrangement of any new financing,” Moody’s said.
However, the rating agency doesn’t expect Hidrolectrica to miss its short-term debt repayment schedule.
“Moody’s expects that Hidroelectrica’s financial position upon entering the insolvency process will be such that it could continue to meet debt service and repayment from its own resources over the short term,” the statement noted.