TGN May Default by Year-End: Fitch

Argentina’s Transportadora de Gas del Norte (TGN) may default by the end of the year, according to Fitch, which cut the credit to C from CCC and senior unsecured notes due 2012 to CC from CCC, keeping all ratings on negative watch. The agency also predicts recovery of 11%-30% in the event of default. “The rating downgrades reflect Fitch’s expectation that TGN will miss principal and interest payments over the near term, and potentially debt payments due as soon as December 31, 2008 despite sufficient cash on hand,” says Fitch. “The company’s precarious financial difficulties stem from deterioration in TGN’s cashflow after one of its export transportation customers stopped paying earlier this year; continued curtailments of natural gas exports by the Argentine government further heightens the potential for additional export revenue losses,” it adds. The next interest and principal payments due December 31 are $15.8m and $6.3m, respectively, says Fitch, adding that for issuers in the C rating category, default is deemed to be imminent. As of September, TGN’s total debt was $345m, composed of $141m amortizing notes at 6.5% step-up due in 2012, and $204m bullets at 7.5% step-up due in 2012. Debt restructuring was completed in late August 2006, adds Fitch. TGN’s 6.5% of 2012 and 8% of 2012 were bid at 42 and 37, respectively, last week, according to Credit Suisse.