S&P to decide in 30 days whether to downgrade Areva to junk

Tue Sep 9, 2014 4:26pm EDT
 
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By Geert De Clercq

PARIS (Reuters) - Credit ratings agency Standard & Poor's has put French nuclear power engineering group Areva on "creditwatch negative" and will decide within 30 days whether to downgrade its credit ratings by one notch into non-investment grade territory.

A downgrade into the junk category would make its shares and bonds unattractive for investment funds who only seek investment-grade securities, but Areva's finance chief said the firm was not worried about its liquidity or borrowing costs.

Areva's BBB- long-term issuer rating from S&P has been hovering above junk status since December 2011, when it was downgraded two notches from BBB+. S&P made that downgrade after Areva booked a 2.4 billion-euro ($3.2 billion) charge for project delays and canceled orders in the wake of Japan's Fukushima nuclear disaster.

"In view of the deteriorated operating performance and forecast negative free cash flow over 2014-2015, we currently believe a downgrade of one notch is possible," S&P said in a statement.

On Aug. 1 Areva (AREVA.PA: Quote) shocked investors with a 694 million-euro loss caused by disappointing nuclear revenue, a writedown on its withdrawal from a solar power business, and a cut in its 2014-2016 core earnings and cash flow targets.

Its stock fell 20 percent that day, the worst fall since Areva was formed in 2001.

S&P said it believed there was an increased possibility Areva would post more negative free cash flows, despite its decision to curb capital expenditures, and that net debt may materially increase over 2014-2015.

The agency said it will make its ratings decision after further discussions with management and with the firm's state shareholder, to assess whether any measures will be made to limit net debt increases.   Continued...

 
View of the Areva Tower, the headquarters of the French nuclear reactor maker Areva, at La Defense business district in Courbevoie, February 26, 2014.   REUTERS/Jacky Naegelen