Fitch Assigns Province of Chubut Proposed Bond 'B(EXP)' Expected Rating

MONTERREY, Mexico--(BUSINESS WIRE)-- Fitch Ratings has assigned an expected long-term rating of 'B(exp)' to the Province of Chubut, Argentina's forthcoming bond. The bond will be issued for up to USD650 million and will be a direct, general, unconditional and unsubordinated obligation of Chubut. The notes will be secured by a percentage of hydrocarbon royalties to be paid by Pan American Energy LLC's Argentine branch to the Province. The rating is in line with the province's Long-Term Foreign Currency Issuer Default Rating of 'B'/Outlook Stable. Chubut's ratings are capped by the Country Ceiling.

The bond will denominated in U.S. dollars and will carry a fixed interest rate according to market conditions and be payable on a semi-annual basis. The maturity is expected to be 10 years, with a grace period of four years. The province shall make a fiduciary assignment to the Argentine Collateral Agent of a percentage of the royalties payable to the province by the concessionaire. The notes will be governed by the laws of the State of New York.

Law VII No.72 and Governor's Decrees No. 541 and 924 of 2016 authorized the issuance of this debt for up to USD650 million or its equivalent in local or other currencies. Of the proceeds, 50% would be for debt repayment, and the other 50% to finance certain infrastructure works in municipalities (1%), certain infrastructure works in rural areas of the province (15%), and other works to be agreed upon with municipalities of the province (34%).

According to Fitch calculations, the expected gas and oil royalties used for the bond's debt payment would provide debt coverage of around 1.4x in a conservative scenario.

The events of default include: Failure to pay debt service for a period of 20 days, debt service reserve account not fully funded in accordance with the schedule, default of the provincial general government debt, and royalties coverage below 1.35x, among others. Fitch will monitor the bond's performance and compliance with these pledges.

RATING SENSITIVITIES

The final rating of Chubut's new bond is contingent upon the receipt of final documents conforming to information already received. If there is an increase in the Country Ceiling, Fitch will evaluate Chubut's hydrocarbon market, the concessionaire rating, and the the bond's performance to determine if there is potential for a positive impact on the bond rating.

Additional information is available on www.fitchratings.com.

Applicable Criteria

International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878660

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008570

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008570

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160707006117/en/

Fitch Ratings
Primary Analyst
Alejandro Guerrero
Associate Director
+52 55 5955 1600
Fitch Mexico S.A. de C.V.
Prol. Alfonso Reyes 2612
Monterrey, N.L.
or
Secondary Analyst
Natalia Etienne
Analyst
+52 81 8399 9100
or
Committee Chairperson
Christophe Parisot
Managing Director
+33 1 44 29 91 34
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
[email protected]

Source: Fitch Ratings

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