NEW YORK (Reuters) - Standard & Poor’s on Tuesday warned it may cut the sovereign credit rating for Belize, citing the government’s move to buy the country’s sole electricity provider which could hurt its credit profile.
Belize is currently rated B by S&P, five notches below investment grade. Moody’s Investors Service has Belize one notch lower at B3.
The government is seeking authorization from parliament to buy a controlling share of Belize Electricity Ltd, currently majority owned by Canadian utility Fortis Inc, S&P said in its statement.
“The final details of the acquisition and its impact on the government’s debt burden and fiscal flexibility are uncertain. However, based on the information currently available, we believe that there is significant likelihood that we could lower the ratings to ‘B-minus’ upon the conclusion of this transaction,” S&P said.
In its statement, S&P said Belize’s general government debt as a portion of gross domestic product is already a high 85 percent, with the interest burden around 15 percent of its revenues.
“The proposed bill would allow the government to take over Fortis’s share, with an estimated book value of $100 million,” S&P said, which noted Fortis holds 70 percent of the company’s equity.
S&P said the government began to pursue a buyout when BEL’s management reported difficulties in meeting financial obligations and covering the utility’s operating costs.
“In our view, the government is acquiring BEL to ensure the continuity of the country’s electricity supply,” S&P said.
Reporting by Daniel Bases and Pam Niimi; Editing by Andrew Hay