Fitch: Sabesp Expected to Breach Covenant in 2016
OREANDA-NEWS. Fitch Ratings has published a 2016 scenario analysis report for Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) highlighting potential implications for the company's ratings from FX variation and tariff policy.
Among the structural aspects discussed in the report is the timing of the potential suspension of the water reduction tariff incentive program current in place. Fitch expects Sabesp will breach its gross leverage covenant of 3.65x during 2016 in the most likely scenario, although debt acceleration is unlikely as the company should successfully negotiate waiver.
"The combination of relevant FX debt amortization in 2016, slight volume billed growth and significant capex should pressure Sabesp's cash flow and maintain its leverage at moderate levels, despite ongoing recovery of the hydrology situation," said Gustavo Mueller, Associate Director. "The current restricted debt market access and challenging macroeconomic environment are also concerns."
The full report, 'Sabesp - 2016 Scenario Analysis', is available at www.fitchratings.com or by clicking on the link below.
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