Author: AtlanticIS

Electrical power substation surrounded by snow-covered landscape and village houses
Infrastructure

Iberdrola’s Caruna acquisition adds cash flow predictability and new European market

AtlanticIS

Spain, July 21, 2026 – Spain-based electric utility company Iberdrola (Baa1 stable) announced that it has entered an agreement with KKR and Ontario Teachers’ Pension Plan Board (Aa1 stable) to acquire an 80% stake in Finland’s largest electricity distributor, Caruna, for a cash consideration of about €2 billion. Iberdrola expects to fund the acquisition with existing cash and new debt. 50% of the purchase price will be paid upon closing of the transaction, which is expected in the first quarter of 2027, whereas the remaining 50% will be paid 30 months after the closing date. Caruna serves 1.5 million people and its regulated asset base (RAB) is expected to reach €2.536 million in 2027. The acquisition remains subject to regulatory approval.

The acquisition will strengthen Iberdrola’s risk profile. Iberdrola will raise its exposure to regulated activities and the stability of its cash generation because of Caruna’s perpetual concession and Finland’s well-established and transparent regulatory framework, although it is less predictable than that of some of its Western European peers. Iberdrola will also increase its geographic diversification as Finland (Aa1 stable) is a new European market for the group, helping to offset recent market exits, in particular its exit from Mexico. The acquisition also aligns with the group’s longstanding strategic focus on network development, which accounted for €9 billion or 62% of the group’s capital spending in 2025.

The benefits are somewhat moderated by Caruna’s relatively small scale within the wider Iberdrola group. We expect the company- adjusted EBITDA contribution of regulated activities to increase to about 51% post-acquisition from 49% in 2025, and company- adjusted EBITDA generated outside Spain to grow to 63% post-acquisition from 62% in 2025.

While we view the acquisition as relatively expensive at around 2.0x enterprise value/regulated asset value, we expect it to modestly weaken Iberdrola’s financial profile, driving a 70-90 basis point decline in its Moody’s-adjusted funds from operation (FFO)/net debt given that 50% of the purchase price will be paid 30 months after closing. As a result of the group’s strong operating performance and substantial headroom relative to our ratio guidance, we anticipate that Iberdrola will remain comfortably positioned in its rating category.

However, the transaction will temporarily increase the already elevated structural subordination, given Caruna’s relatively high leverage. Gross debt at Iberdrola’s subsidiaries will account for about 38% of consolidated debt upon closing, up from 35% (including 50% of Iberdrola hybrids) as of year-end 2025. Iberdrola confirmed its intention to use intercompany loans to replace Caruna’s existing external debt at maturity or when financially attractive to do so. This approach mirrors the financial policy the group applies to its North American operations, and plans to apply to the external debt of recently acquired Electricity North West (Baa1 stable).

Caruna is the largest electric distribution operator in Finland, serving 21% of the country’s electricity supply points, under a well- established and transparent regulatory framework. The company operates 89,300 kilometers of distribution lines, most of which are underground. In 2025, Caruna reported EBITDA of €343 million and net debt of €3.1 billion, including a €770 million shareholder loan to be 80% repaid as part of the transaction.

Credit Outlook: July 27, 2026. Pg. 20

Moody’s Investors Service

São Paulo city skyline with high-rise buildings and busy roads at sunset
Banking

Brazil’s credit relief for tariff-affected companies is positive for banks

AtlanticIS

Brazil, July 29, 2026 – Brazil’s (Ba1 stable) President Luiz Inácio Lula da Silva authorized the National Treasury and development bank Banco Nacional de Desenvolvimento Economico e Social (BNDES, Ba1 stable, ba11) to provide up to BRL18.5 billion ($3.6 billion) in subsidized funding for working capital and investment to support industries affected by the latest 25% US tariff increase, which took effect on 22 July. Dubbed Brazil Sovereign 3, the program will also assist companies affected by Middle East conflict-related disruptions, supporting economic activity and the labor market.

The program will help banks limit asset risks and contain loan delinquencies, which have been historically high this year amid a policy interest rate at 14.25% per year as of July. However, strong stimulus for loan origination amid still-elevated household indebtedness and asset-quality pressure would likely have negative credit implications from 2027 onward if interest rates remain significantly high. Frequent use of these support measures would also likely create incentives for borrowers to rely on additional government forbearance in the future.

Under Brazil Sovereign 3, the National Treasury will provide BRL13.5 billion, largely from funds not used in the first phase of the program, while BNDES will contribute BRL5 billion. BNDES will be responsible for disbursing the credit lines, which will carry below-market interest rates between 3% and 9.8% per year. Loan origination will begin once the detailed framework underpinning the program is published in a presidential decree in the coming weeks.

At this stage, the government has only a limited estimate of total demand for the credit lines, although subsidized rates will likely encourage companies to access the program. The program’s total volume, which will also be sufficient to provide aid to companies affected by a potential additional 12.5% tariff, accounted for just 0.25% of total system credit as of May.

Although below-market funding has an immediate positive effect on production and companies’ financial profiles, it can also distort the financial system if used indiscriminately. Such distortions were evident in the 2010s, when the government relied on sizable subsidized lending to promote economic growth, crowding out private-sector banks.

The first group of companies targeted by the measure comprises exporters directly affected by the new tariffs. A second group includes companies in strategic sectors that are relevant to Brazil’s trade balance, including critical minerals and fertilizers. The third group consists of exporters to Persian Gulf countries that are exposed to disruptions related to the Middle East conflict.

In recent weeks, the government has intensified efforts to reduce credit leverage and support economic activity ahead of the presidential elections scheduled for October. On 15 July, a provisional presidential decree authorized banks and rural producers to renegotiate up to BRL100 billion in rural debt originated exclusively by banks. To be eligible for the renegotiation program, producers must prove that they suffered losses in two harvests between 2019 and 2025 because of adverse weather or lower income caused by market conditions. The new credit lines will carry interest rates between 5% and 12% per year and tenors of eight to 10 years, depending on the size of losses, with a two-year grace period.

Although the rural debt renegotiation program will be available to all Brazilian banks, it will particularly benefit government- ownedBanco do Brasil S.A. (BB, Ba1 stable, ba1) and Caixa Economica Federal (Caixa, Ba1 stable, ba2). Their problem loan ratios in rural lending were 6.2% at BB and 18.3% at Caixa in March 2026, compared with the financial system average of 4.4%.

The measure will allow rural producers to renegotiate loans on more favorable financial terms and help prevent a further rise in delinquencies in 2026, a credit positive for banks. On 30 June, the government unveiled its BRL622 billion Crop Plan for the 2026-27 production cycle. Potential borrowers can access these funds provided they have no overdue debt obligations with banks, a condition that can also be met through these renegotiations.

Credit Outlook: 3 August 2026. Pg. 15

Moody’s Investors Service

Banking

Peru’s new payment rules will foster greater digitalization, a credit Positive

AtlanticIS

Peru, December 6, 2025 – The Central Reserve Bank of Peru (BCRP) published its updated rulebook for payments in the official gazette, strengthening its compliance framework and fostering transparency through data requirements, including new cyber-security rules, as the banking system rapidly accelerates digitalization of its operations. The new rules mandate that payment fees be nondiscriminatory, cost-based, and subject to an annual review by the regulators. The new rulebook is effective 1 April (replacing the 2010 version) and is credit positive for Peru’s financial system because it promotes competition, supporting the continued expansion of digital payments (see exhibit) and increased credit volumes by enhancing efficiencies across the banking sector.

Currently, low-value digital payments (less than PEN15,000 or $5,000) in Peru are largely controlled by banks, with interbank transfers comprising 66% of this total in the first half of 2025 (H1 2025), in accordance with data available in the BCRP’s September 2025 National Payments Systems Report. The updated rulebook will encourage new payment solutions and require interoperability among new systems, cementing the 2023 Payment Services Interoperability Regulation aimed mainly for digital wallets, enabling users to transfer funds regardless of provider or account type. This shift will initially reduce debit and credit card and current account revenue for Peru’s banks, which comprised on average about 8% of net revenues of the four largest banks as of September 2025. In addition, greater use of digital payments can drive growth in banking services, leading to larger deposit inflows and an expanded addressable market.

Instant payments accounted for 11% of low-value payments in H1 2025 and were dominated by two digital wallets: Yape, managed by the country’s largest bank Banco de Crédito del Perú (BCP, Baa1 stable, baa11), with 82% market share, and Plin, with 18%, a joint venture between next three largest banks in Peru, Banco BBVA Perú (Baa1 stable, baa2), Scotiabank Perú S.A.A. (Baa1 stable, baa2), and Banco Internacional del Perú S.A.A. (Baa1/Baa1 stable, baa2).

Competition for payments is poised to increase in Peru with the BCRP’s late 2026 planned introduction of its national digital payments platform, which is similar to Brazil’s PIX, Colombia’s Bre-B, or India’s UPI. However, Yape is already gearing up for competition, diversifying revenue streams beyond transaction fees, offering small installment loans and insurance brokerage, accelerating its path to the monetization of its client base. Payments are still the dominant contributor to Yape’s revenues, at 53%, followed by lending at 20%, as of September 2025.

As more customers adopt digital payments, electronic transactions through bank accounts increase. The shift allows banks to reduce their costs for cash transport and security – expenses that are particularly high in Peru, where many communities face limited access to financial services because of the country’s complex geography.

Credit Outlook: 15 December 2025. Pg. 14

Moody’s Investors Service

Corporates

BHP’s minority stake sale strengthens liquidity and supports growth

AtlanticIS

Australia, December 9, 2025 – Australian resources company BHP Group Limited (A1 stable) announced it has entered into a binding agreement with Global Infrastructure Partners (GIP), a part of BlackRock, regarding BHP’s share of the Western Australia Iron Ore (WAIO) inland power network. Under the agreement, a trust entity will be established, 51% owned and controlled by BHP, with GIP providing $2 billion in funding for a 49% minority stake. BHP will pay the entity a tariff linked to its share of WAIO’s inland power over a 25-year period. Importantly, BHP retains full operational control of WAIO and its inland power infrastructure, and the agreement does not affect existing joint venture arrangements or asset ownership.

BHP announced that the net proceeds will be incorporated into and evaluated in accordance with its capital allocation framework.

We expect the proceeds from the minority stake sale to increase liquidity and support the high capital spending requirements of the company in the medium term. BHP’s capital spending has increased as the company’s portfolio evolves toward future-facing commodities such as copper and potash. The company expects capital and exploration spending of around $11 billion annually in fiscal 2026 (ending June 2026) and fiscal 2027, with a planned reduction to around $10 billion a year on average from fiscal 2028 through to fiscal 2030 (see exhibit).

We regard the minority stake sale as equity in nature. Our understanding is that there is no mechanism for GIP to achieve preset target returns.

It is our expectation that BHP will fully consolidate the trust entity and that the cash outflow related to the tariff payments will represent less than 1% of the overall group’s earnings. Given BHP’s robust earnings generation capacity, these payments are immaterial and are not expected to have a meaningful impact on the group’s credit metrics or overall credit quality. We expect BHP’s track record of conservative credit metrics, excellent liquidity position, clearly articulated financial policies and flexible dividends to support its current growth phase while retaining credit metrics in line with our parameters for its ratings.

Credit Outlook: 15 December 2025. Pg. 10

Moody’s Investors Service

Countries

Fitch Upgrades Spain to ‘A’; Outlook Stable

AtlanticIS

Spain, September 26, 2025 – FitchRatings has upgraded Spain’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘A’ from ‘A-‘. The Outlook is Stable. Fitch has also upgraded Spain’s Short-Term IDR to ‘F1+’ from ‘F1’.

Key Rating DriversThe upgrade of Spain’s IDRs reflects the following key rating drivers and their relative weights:

High

Economic Outperformance: Spain’s economic performance has exceeded expectations and significantly outpaced other major eurozone economies. Economic growth is supported by large migration inflows and strong, increasingly diversified services exports. Recent productivity gains, moderate wage growth and relatively low energy prices have boosted external competitiveness and strengthened private external balance sheets. Fitch expects the economy to remain resilient, helped by limited exposure to US tariffs and ongoing net external deleveraging.

Growth Exceeds Expectations: We have raised our real GDP growth forecast for Spain to 2.7% in 2025 and 2.0% in 2026, reflecting stronger-than-expected quarterly growth in 1H25. Growth has been broad, with the services sector strengthening due to a rebound in tourism (with higher off-season inflows and quality upgrades) and solid performance in non-tourism services such as information communication technology and professional services. Business and consumer sentiment indicators are positive. The manufacturing sector (11% of gross value added) has benefited from increased solar and wind generation, which has helped lower electricity prices to well below the eurozone average.

Favourable Growth Prospects: Fitch has revised Spain’s potential growth estimate to 2% from 1.4%, mainly due to rapid expansion in labour inputs and supported by higher total factor productivity. Strong labour force growth reflects significant migration inflows, mostly from Latin America, while recent reforms and a shared language have supported labour market integration. Labour productivity growth has risen to over 1% annually from 2022 to 2024, compared with 0.3% between 2014 and 2021, although further improvements are needed to lift GDP per capita growth, which remains below headline growth.

Labour Market Supports Growth: Labour market conditions have strengthened significantly, with activity and employment rates reaching record highs, bolstering economic growth. Temporary employment has fallen to historical lows, supported by the 2022 labour market reform. The unemployment rate remains the highest in the euro area, at about 10.4% as of July, despite recent progress in reducing it.

Medium

Reduced External Vulnerabilities: Net external indebtedness continues to fall, extending the trend that began after the eurozone crisis and was interrupted only briefly by the pandemic. Net external debt declined to 44% of GDP at end-2024, down from a peak of 95% in 2013, driven by improving private external balance sheets and ongoing current account surpluses. The current account balance improved to 3.1% of GDP in 2024, supported by a stronger service surplus from tourism and diversification into non-tourism exports deficit. The primary and secondary income balance remain highly negative due to large remittance outflows and Recovery and Resilience Facility grants.

Fitch expects current account surpluses to average 2.6% of GDP between 2025 and 2027 (relative to an average deficit of 0.5% for the ‘A’ rated median), with net external debt falling below 40% of GDP, reaching 37% by 2027, gradually closing the gap to the net creditor position of the peer median of 6.1%.

Spain’s ‘A’ IDRs also reflect the following key rating drivers:

Rating Fundamentals: The ratings are supported by governance indicators consistent with the ‘A’ rating category and eurozone membership supporting institutional stability. These strengths are balanced against a still high public debt ratio.

Political Deadlock: Spain’s centre-left minority government increasingly struggles to secure parliamentary support, including for the passage of budgets since 2023, from smaller parties, including from the Catalan separatist party. Prime Minister Sánchez faces mounting pressure from corruption allegations involving the Socialist Party and family members, while political and regional fragmentation impedes progress on crucial reforms, including housing supply solutions and the development of a coherent fiscal consolidation strategy. Parliamentary elections are not due until 2027.

Moderate Fiscal Deficits: We forecast the general government deficit will fall to 2.6% of GDP in 2025 from 3.1% in 2024, driven by the absence of one-off expenses and continued revenue growth offsetting a gradual increase in interest costs. Spain will meet its NATO defence spending target of 2% of GDP this year, up from 1.4% in 2024, with a limited impact on the deficit due to spending reallocations and reclassifications. We forecast a deficit of 2.4% of GDP in 2026, reflecting the phase-out of flood relief measures, rising to 2.5% in 2027 as elections approach and interest expenses increase. This is slightly below the ‘A’ rated peer median of 3.1% in 2026 and 2.9% in 2027.

Fiscal Uncertainties: Pro-active fiscal consolidation efforts have been limited, in Fitch’s view, and fiscal improvement has been driven mostly by the phasing out of temporary measures and strong revenue growth supported by a solid labour market and robust GDP growth. Political fragmentation raises uncertainty about parliamentary approval of the 2026 budget, and Fitch expects the 2023 budget to be rolled over for a third consecutive year, with new measures likely passed on a law by law throughout the year.

Fiscal uncertainty extends to the medium term due to the lack of a credible fiscal strategy. The government targets a deficit of 1.5% of GDP and a debt/GDP ratio of 94.8% by 2029 under its seven-year adjustment plan, but the plan lacks detailed measures and faces challenges from the absence of a budget and political majority for consolidation.

High Debt, Gradual Reduction: Fitch projects the general government debt ratio will fall from 101.6% of GDP in 2024 to 100.7% by 2027, and below 100% thereafter, supported by sound nominal GDP growth. This is high relative to the ‘A’ category median of 53.7%. However, we expect debt will temporarily increase in the short term, even as fiscal deficits narrow, due to Recovery and Resilience Facility funds and cash-to-accrual accounting adjustments totalling 3.6% of GDP in 2025-2026.

ESG – Governance: Spain has an ESG Relevance Score (RS) of ‘5[+]’ for Political Stability and Rights and the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Spain has a high WBGI ranking at 74, reflecting its long record of stable and peaceful political transitions, well-established rights for participation in the political process, strong institutional capacity, effective rule of law and a low level of corruption.

Source: Fitch Ratings