Fitch downgrades Anglian Water debt

Fitch Ratings has downgraded Anglian Water’s debt rating to reflect pressure on its operating company’s financial profile from “Ofwat's challenging final price determinations.”

Fitch dropped the water company’s rating for asset-backed (secured), unsubordinated debt to A- from A but removed it from Rating Watch Negative. It has also downgraded Anglian’s subordinated (class B) debt to BBB from BBB+ . Both ratings were designated Stable.

The ratings agency said that while the outcome of the Competition and Markets Authority appeal is uncertain, it “does not expect a potential increase in price settlement to be sufficient to maintain Anglian's credit quality. The Stable Outlooks reflect a fair amount of headroom at the new rating levels.”

Fitch has also downgraded by two-notches the asset-backed debt rating for Anglian’s holding company, Osprey Acquisitions to BB- from BB+. That, according to Fitch, arose from its accompanying one-notch downgrade to Osprey’s Long-Term Issuer Default Rating (IDR) to BB- with Negative Outlook, and a one-notch downgrade “reflecting our expectation of average debt recovery prospects.”

Fitch said its downgrade of Osprey’s IDR reflected its anticipation of reduced cash dividends from Anglian Water following its Final Determination as well as Osprey’s “consistently weak financial profile including gearing, interest cover and dividend cover all being outside our previous negative rating sensitivities.”