Moody's de México has today downgraded the issuer rating assigned to Abengoa México, S.A. de C.V. to C from Caa2. At the same time, Moody's confirmed the NP and MX-4 ratings assigned to the company's commercial paper program.

..Issuer: Abengoa Mexico, S.A. de C.V.

Downgrades:

.... Issuer Rating, Downgraded to C from Caa2

.... Issuer Rating, Downgraded to C.mx from Caa2.mx

Affirmations:

....Senior Unsecured Commercial Paper, Affirmed NP

....Senior Unsecured Commercial Paper, Affirmed MX-4

Outlook Actions:

....Outlook, Changed To No Outlook From Negative

RATINGS RATIONALE

The downgrade was prompted by the announcement made by Abengoa Mexico on December 3, 2015 about missed payments of principal and coupons under certain issuances of its commercial paper program of which MXN 2.1 billion are currently outstanding. Under the underlying indentures, the missed payments constitute an event of default if not cured in a 5-day period and trigger the anticipated amortization of all debt outstanding under the program.

Considering that the missed payments refer to a modest amount of around MXN 267 million (USD 15.8 million), Abengoa Mexico's inability to service them reflects the lack of access of the Mexican subsidiary to its surplus in the centralized treasury controlled by its parent company, Abengoa S.A. (Caa2, negative) in Spain. As of the end of September 2015, Abengoa Mexico's net position in the group's centralized treasury was of MXN 7.4 billion. For the same period, cash on hand was MXN 103 million.

Abengoa S.A. is currently facing severe liquidity restrictions. On November 25, 2015, Abengoa S.A. announced the cancellation of the expected equity injection expected from Gonvarri Corporacion Financiera (Gonvarri), given its consideration that the condition of a substantial financial package was unfulfilled. The company also announced that it made a formal filing under article 5 bis of the Spanish Insolvency Law (Ley Concursal), which though not a default in itself, reflects the precarious liquidity absent the equity raising and may be a likely precursor to a formal restructuring proceeding. For further detail on the rating action on Abengoa S.A., please refer to moodys.com.

Without the access to the group's centralized treasury, we estimate that recovery for senior unsecured creditors will be very low and in line with the C rating assigned. Moreover, further pressuring recovery prospects is the fact that Abengoa Mexico is one of the subsidiaries guaranteeing a large portion of the group's debt. As of the end of 2014, Abengoa S.A. estimated that the group of guarantors accounted for around 75% of consolidated EBITDA. We estimate guaranteed debt as of the end of 2014 at around EUR 3.8 billion. We do not adjust Abengoa Mexico's leverage to account for guaranteed debt as the subsidiary is only a small contributor to the guarantor group. However, these instruments rank at the same level as Abengoa Mexico's commercial papers, which recovery prospects are therefore very low under a liquidation scenario.

A ratings upgrade is not envisioned in the short run, longer term, a positive rating action will require a substantial improvement in the company's liquidity position. Given the linkage between Abengoa Mexico and its parent company, a positive rating action for Abengoa Mexico would also require material improvements in Abengoa S.A. credit profile.

The C rating assigned is the lowest rating that can be assigned by Moody's.

Headquartered in Mexico City, Abengoa Mexico is a fully owned subsidiary of Abengoa S.A. (Nasdaq: ABGB).