OREANDA-NEWS. Fitch Ratings has updated its criteria report "Recovery Ratings and Notching Criteria for Utilities". The report replaces that of the same name dated 18 November 2014.

The utilities, power and gas sector-specific criteria report describes how recovery ratings, with resultant potential uplift above the relevant Issuer Default Rating, are included in debt instrument ratings.

Fitch has made a modification to the notching of preferred and hybrid securities issued by utilities, which is expected to apply in limited instances. The modification addresses the situation when a parent company's sole means of servicing its debt comes from one regulated utility subsidiary's dividend stream. In this situation, the parent company does not have any other assets or own any other operating subsidiaries (ie source of cash flows). Here, the IDRs may have been aligned under Fitch's Parent and Subsidiary Rating Linkage criteria. The modification reflects that the probability of default and recovery prospects for the subsidiary's preferred/hybrid security and the parent company's level unsecured debt are closely aligned. The modification would provide Fitch the flexibility to notch these junior subordinated instruments zero to two notches down from the IDR (compared with one to two notches previously). Fitch does not expect a material number of rating changes as a result of this modification, given the limited circumstances under which the modification would be applicable.