La Lata to Get Approval for Debt Restructuring, Rating Firms Say

Central Termica Loma de la Lata SA, a unit of Argentina’s biggest electricity company, probably will get bondholders approval to delay until 2015 payments on bonds, said Moody’s Investors Service and Fitch Ratings.

La Lata, as the company owned by Pampa Energia SA is known, today will meet bondholders from the local pension system known as Anses seeking approval to postpone $40 million in payments due this year as its sole revenue generating turbine is still being repaired in Germany, the analysts said.

The company said Nov. 23 a storm damaged its TurboVapor turbine. Moody’s and Fitch analysts said La Lata may struggle to service its bonds after the damage as the turbine accounts for almost 90 percent of the company’s earnings before interest, taxes, depreciation and amortization, or Ebitda.

“The only holder of the bonds, the Anses, have agreed to postpone this year’s payments,” said Gabriela Curutchet, the Fitch analyst who cut La Lata’s bonds one step to BBB last month. “If they finally announce this deal, we will leave the rating as it is, otherwise, we will have to downgrade even further.”

A default on the bonds is possible if the turbine isn’t operating by May 15, Curutchet said in a telephone interview from Buenos Aires.

Cash Flow

The turbine should be back in Argentina and operating in a matter of days, a company official, who can’t be named according to the company’s internal policy, said yesterday. He declined to comment on new terms for the bonds.

An Anses press official, who asked not to be named in accordance with pension system communications policy, didn’t immediately comment in a telephone interview on whether Anses will approve revised terms for the bonds.

Moody’s will review any new terms and decide if a ratings change is warranted, Jose Soares, an analyst who follows the company, said in a telephone interview from Sao Paulo.

“We will project the new cash flow based on the changes of the terms, consider the company’s ability to generate cash flow after repairing the turbine and how it will recover losses for the period the turbine was stopped,” said Soares.