S&P Global Ratings raised its corporate credit rating on AES Corp. to one notch below investment grade on expectations of the company accelerating debt reduction with proceeds from asset sales.
S&P updated AES to BB+ from BB on March 16. The ratings outlook is stable.
"With the debt pay down, adjusted [funds from operations] to debt will improve to just over 17.0% from about 13.5% and over 19.0% by 2019. This puts the company on the higher end of the aggressive financial risk profile range," S&P said.
AES offered to purchase up to $700 million of its 5.5% senior notes due 2024 and 5.5% senior notes due 2025. The company released
The tender offer is dependent on the company receiving cash proceeds from the sale of its 51% equity interest in its Philippines subsidiary to SMC Global Power Holdings Corp. for $1.05 billion. S&P expects the sale to conclude by the first half of 2018.
As part of this rating action, S&P also upgraded AES' senior unsecured debt rating to BB+ from BB and affirmed the senior secured debt rating at BBB-.
This also prompted S&P to raise its issuer credit ratings on AES subsidiaries IPALCO Enterprises Inc. and Indianapolis Power & Light Co. to BBB from BBB- with a stable outlook.
"The upgrades of IPALCO and IPL reflect the upgrade at ultimate parent AES, the strength of IPALCO's stand-alone credit profile, and the cumulative value of structural protections in place that insulate IPALCO from AES," S&P said in a separate March 16 research report.
S&P also upgraded ratings on IPALCO's senior notes to BBB- from BB+ and IPL's senior secured first-mortgage bonds to A- from BBB+ and preferred stock to BB+ from BB.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here and here.