Thumbs up for Vector's debt

By NZPA

Tuesday 10th December 2002

Ratings agency Moody's has given Vector the thumbs up on its debt ratio and confirmed a strong rating for the medium term notes issue of the company it has taken over.

Moody's confirmed UnitedNetworks' (UNL) Baa1 rating on its $760 million medium term notes issue in Australian and New Zealand dollars, with a stable outlook on its underlying rating.

UnitedNetworks, previously the country's biggest power distributor, has since been taken over by its rival, Vector, with some parts of the business on-sold to Powerco and Hawke's Bay Networks.

Vector will service UNL's issue obligations.

Moody's said the ratings confirmed the underlying credit profile of Vector.

"Moody's expects that Vector will generate sufficient cashflow each year to fund its capital expenditure and dividend requirements.

But the agency noted that Vector's credit strength was tempered by some uncertainty in the regulatory regime and the relatively high level of debt it carried.

"In Moody's' opinion, Vector is well positioned to withstand the effect of any price controls because Vector's network charges are below the New Zealand average. Because of this, a material reduction in network charges is unlikely."

Debt was expected to come down over the next five years as free cashflows paid down senior debt, aided by a proposed equity issue in 2003.

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