A proposed acquisition of Connecticut utility parent UIL Holdings Corp. by Iberdrola USA has not damaged or improved the various credit ratings of the two and their subsidiaries, according to Moody’s Investors Service and Fitch Ratings.
The new parent company that would result from the $3 billion deal would be able to “gain scale and geographic diversification without the eroding effects of incremental debt,” Moody’s said.
Moody’s said that Iberdrola’s strong balance sheet compensated for UIL’s high leverage and weaker financial ratios. The ratings company affirmed the various ratings for UIL (Baa2) and its subsidiaries, and kept their outlooks at ‘stable.’
Meanwhile, Fitch affirmed Iberdrola’s rating of ‘BBB,’ which is similar to Moody’s Investors’ ‘Baa2.’ Both are on the lower end of investment grade.
Fitch said Iberdrola’s use of equity and cash, rather than debt, to fund the deal improves its credit profile.
Moody’s warned that regulatory conditions on the proposed merger, such as limits on lending or dividends, may impact UIL’s future ratings.
