Edison rating slashed to junk status over EDF takeover row

23rd December 2011, Comments 0 comments

Fitch ratings agency on Friday cut Italian power company Edison's rating by three notches to junk status due to its weak liquidity and lengthy delays in a proposed takeover by French giant EDF.

The rating was downgraded to BB- from BBB- due to "the negative impact of the prolonged negotiation process," Fitch said in a statement.

"The negotiation process has recorded four reschedulings and increasingly appears at risk of failing to meet the next deadline of 30 December 2011.

"Together with a high probability of a further rescheduling of negotiations, Edison's liquidity position remains weak," Fitch added.

Fitch also pointed to the risk of a political intervention in the deal saying that a resolution "influenced by political pressure might result in further lengthy negotiations and potential legal disputes."

"A protracted failure to reach an agreement among shareholders might escalate liquidity concerns and be prejudicial to Edison's bondholders and therefore result in a further downgrade of the company," it said.

"If an agreement is reached that would result in the majority of Edison being transferred to EDF, there is scope for positive rating momentum."

Edison's Italian shareholders have said they want control of Edipower, a subsidiary of Edison, in exchange for a takeover by EDF.

Shareholders are set to hold a meeting on the issue on December 29.

© 2011 AFP

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