Consolidated Energy - comment

The downgrade from S&P reflects the same concerns that Moody’s showed. CEL favours supporting its parent's (Proman's) growth plans over debt reduction. This is something we identified when we first launched coverage of the name. The level of lending to CEL is higher than we expected; the loan to Proman has grown from $260m to $360m. The guarantee of TLB + RCF = $440m was already in our calculations. We see $2bn of value under our DCF, and Proman will want to protect that. The $224m bond maturing in May 2026 will not be allowed to bring the house down, but we agree that the coupon will be significantly higher than the current 6.5%. We remain positive on the name whilst acknowledging that deleveraging will be slower than we initially expected.

https://www.spglobal.com/ratings/en/regulatory/article/-/view/type/HTML/id/3470932