Tag: debt

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

Fitch Affirms Credicorp Bank’s Long-Term IDR at ‘BB+’; Outlook Stable

AtlanticIS

Panama, October 06, 2025 – Fitch Ratings has affirmed Credicorp Bank, S.A.’s Long-Term Issuer Default Rating (IDR) at ‘BB+’, Short-Term IDR at ‘B’, Viability Rating (VR) at ‘bb+’ and the Government Support Rating (GSR) at ‘No Support’ (‘ns’). Fitch has also affirmed Credicorp’s Long- and Short-Term National Ratings at ‘AA(pan)’ and ‘F1+(pan)’, respectively. The Rating Outlook for the Long-Term IDR and Long-Term National Ratings is Stable.

Key Rating Drivers

Operating Environment with Moderate Influence: Panama’s sovereign rating (BB+/Stable) and broader operating environment moderately influence Credicorp’s VR, with the sovereign rating continuing to cap the Operating Environment (OE) score despite fundamentals that point to a ‘bbb’ category. While GDP growth has slowed and interest rates remain high, system credit growth, asset quality, and profitability are outperforming Fitch’s expectations. Fitch projects GDP per capita and Operational Risk Index (ORI) to remain stable and continue to preserve operating conditions for banks.

Consistent Business Profile with High Capitalization: Credicorp’s international and national scale ratings are driven by its ‘bb+’ VR. Fitch views Credicorp’s business profile as strong, supported by conservative risk management, which has led to good asset quality and resilient profitability. Credicorp’s capital strength significantly influences Fitch’s decision to rate the bank at the same level as the Panamanian sovereign and mitigates the risks inherent in its business model.

Consolidated Business Model: Fitch’s ‘bb-‘ score for Credicorp’s business profile exceeds the implied level of ‘b’. Credicorp’s consistent business model, marked by a lower-risk, atomized customer base and proven earnings generation, offsets its lower levels of total operating income (TOI) compared to regional peers. From 2022 to 2025, the bank’s average TOI was USD74 million.

Credicorp’s market position is moderate, with a market share of 1.5% by assets in the banking system. The bank’s strategy focuses on strengthening its local franchise through consumer lending and enhancing operational and commercial efficiencies via medium-term digital transformation.

Well-Managed Risks: Fitch views Credicorp’s underwriting standards and risk controls as sound, demonstrated by controlled loan deterioration over the economic cycle, resulting in lower credit costs than direct peers. As of June 2025, its loan impairment charges-to-average gross loans ratio was 0.3%, below other mid-sized banks. Fitch’s assessment is also supported by the bank’s reasonable collateral levels, prudent investment policies and conservative balance sheet growth.

Good Asset Quality: Credicorp has maintained good asset-quality metrics that compare favorably with most local peers by metrics and concentration. As of June 2025, stage 3 loans comprised 2.0% of the portfolio. Loan loss allowance coverage of stage 3 loans was a reasonable 74.9%. Good levels of collaterals also support this assessment Fitch expects asset quality ratios to remain stable, with a forecasted stage 3 ratio of 2.1% for 2026 and 2027.

As of June 2025, Credicorp’s collaterals represented 81.2% to the total loan portfolio, while the top 20 borrowers represented 0.64x of the common equity Tier 1 (CET1) ratio. Fitch expects the bank to keep loan delinquencies at manageable levels by focusing on sectors and products where it has extensive expertise.

Consistent Profitability Supported by Associates: Credicorp has demonstrated good profitability and resilience. As of June 2025, the operating profit-to-risk-weighted assets (RWA) ratio was 2.4%, above the 2022-2025 average of 2.0%. Stable asset performance and recurrent profits from investments in associated companies have bolstered profitability. The net interest income from the loan book continues to compose nearly 68.8% of TOI.

However, Credicorp’s operating profits are substantially supported by the profits generated by associates, which as of June 2025 made up 50.6% of the bank’s operating profit (average 2022-2025: 41.1%). Fitch expects Credicorp’s profitability to remain strong, supported by its growth targets and benefits from its associates. Fitch forecasts an operating profit to RWA ratio of 2.2% for 2026 and 2027.

Capitalization a Rating Strength: Credicorp’s capitalization and leverage ratios are stronger versus similarly rated peers, and Fitch deems them a rating strength. As of June 2025, the bank’s regulatory CET1-to-RWA ratio was 21.9%, far exceeding the 10.5% total regulatory minimum. When including the regulatory countercyclical buffer (CCyB), the CET1 ratio reaches 23.6%.

Fitch expects the bank’s capitalization ratios to remain strong in the foreseeable future, supported by reasonable credit growth, consistent earnings generation, and moderate dividend payments. Fitch forecasts a CET1 ratio (including dynamic provision) of approximately 24% for 2026 and 2027.

Stable Deposit Base: Credicorp’s financing is supported by a growing deposit base that has historically maintained the loan-to-deposit ratio below 100%, ahead of its closest peers. As of June 2025, the ratio was 91.5%, influenced by moderate loan growth. Although its funding is concentrated, with customer deposits representing 92.8% of total funding, Credicorp complements its funding structure with medium-term wholesale sources that support asset-liability management.

As of June 2025, the balance of the 20 largest depositors represented 27.8% of total deposits, a proportion that has decreased in recent years, in line with the bank’s funding deconcentration strategy (June 2022: 36.8%). Fitch expects funding and liquidity metrics to remain stable in the medium term, with a likely loans to deposits ratio of 91.8% for both 2026 and 2027.

Source: Fitch Ratings

Corporates

Gol files for Chapter 11, a credit negative for Abra and certain ABS deals, neutral for Avianca

AtlanticIS

Brazil, January 25, 2024 – Gol Linhas Aereas Inteligentes S.A. (Ca negative) filed for voluntary protection under the US Chapter 11 financial reorganization process. Gol’s reorganization process increases liquidity risks for its parent company, Abra Group Limited (Caa3 negative), and the possibility of rental cash flow disruption for certain asset-backed securities (ABS) deals with significant exposure to aircraft leased to Gol.

As part of the filing for Chapter 11, Gol was granted an automatic stay for all debt obligations, including the secured notes due 2028, which are the main source of cash to Abra to cover its own interest payments. The uncertainties regarding the continuity of interest payments and management fees from Gol to Abra increase Abra’s credit risk and could lead to liquidity squeezes, which led us to downgrade Abra’s ratings to Caa3 from Caa1.

At the end of January 2024, Abra had $86 million in cash. Abra’s main source of cash relates to the cash payments from Gol’s secured notes due 2028, and management fees from Gol and Avianca Group International Limited (B2 stable), which provides coverage for the cash interest payment at Abra. We estimate that Abra’s sources of cash excluding the payments from Gol cover its cash interest expense by only 0.4x-0.5x, compared with 1.5x-2x with Gol’s interest payments and management fees. Abra’s main cash outflows relate to its notes interest payments ($60 million-$70 million per year) and annual expenses at the holding level of approximately $20 million per year. With this liquidity profile, Abra could absorb up to two years with no cash inflow from Gol before consuming all of its cash position and potentially entering into a debt restructure with its own creditors.

Gol secured $950 million in a debtor-in-possession (DIP) financing to continue operating during the reorganization process, granted by creditors of Abra. The DIP could lead to continued interest payments for Abra, however the final decision is subject to court hearings as part of Gol’s reorganization process. Before Gol filed for Chapter 11, Abra signed a forbearance agreement with its creditors to avoid the exercise of the rights and remedies with respect to specified defaults as a result of Gol’s filing.

Under Chapter 11, Gol will continue renewing its fleet, returning older aircraft that are grounded and receiving new-generation aircraft. The airline will maintain the timetable to receive new aircraft that were delayed in 2023 and ones that are scheduled for delivery in 2024.

Out of the eight aircraft lease ABS that we have rated since 2021, five have exposure to aircraft1 leased to Gol. These transactions benefit from lessee diversity, with exposure to Gol in these transactions ranging from approximately 2% to 22% of the most recently reported adjusted base value. Certain ABS deals may experience some fluctuations in rent cash flow collections in the coming months as Gol undergoes reorganization. However, liquidity facilities, performance triggers, and deleveraging among other structural features, will help shield senior bondholders from risk. In the event that lease negotiations fail2, deals will likely lose rent cash flow related to the Gol lease until lessors can repossess and re-lease or sell these aircraft. Given the current aircraft shortage in the market, lessors could potentially release these aircraft at favorable lease rates or sell for a premium with shorter downtime.

For Avianca, the potential contagion channels of Gol’s filing for Chapter 11 are contained. Avianca’s post-bankruptcy exit financing contains restrictive covenants, including, among others, debt incurrence limitations, limitations on restricted payments and investments and limitations on related party transactions. Pursuant to the covenants, Avianca’s ability to distribute cash or lend funds to Abra would be very limited. These restrictions serve to insulate Avianca from the financial distress of Gol or any contagion effect on Abra.

The Chapter 11 filing is a result of an accumulated cash burn and high financial leverage for Gol derived from high interest rates, the grounding of the Boeing MAX aircraft in 2019 and the pandemic, which led to weakening liquidity. We downgraded Gol’s ratings to Ca to reflect our view of some prospect for recovery for existing secured and unsecured creditors and will subsequently withdraw the rating. With the Chapter 11, Gol expects to strengthen its financial position, while maintaining the current size of its operations.

Credit Outlook: 1 February 2024. Pg. 6
Moody’s Investors Service