Standard & Poor's Maalot Ltd. has placed the bonds of Israel Electric Corporation (IEC) (TASE: ELEC.B22) on negative credit watch. The bonds are rated AA+.
Maalot cited the erosion in IEC's liquidity and access to financing sources because of its need to repay $1.6 billion in debts during 2009, including $500 million in refinancing in March. Maalot also cited IEC's relatively low liquidity and its aggressive investment plan, which is liable to increase its financing debt.
Additional reasons for adding the bonds to the credit watch list include IEC's weak financial results, the uncertainty regarding its activity as a result of the delay in setting new base electricity tariffs, and the company's troubled labor relations. Maalot also warns that Israel's economic condition and the uncertainty arising from the pending elections in February weaken IEC's ability to implement its streamlining plan and could worsen its labor relations.
Maalot said that bond rating is supported by IEC's importance to the Israeli economy in general and to the electricity market in particular, the fact that it is a wholly-owned government company, and the government's direct and indirect involvement in the company's affairs through the Public Utilities Authority (Electricity).
Published by Globes [online], Israel business news - www.globes-online.com - on December 31, 2008
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