Moody's Investors Service on Tuesday changed to negative from stable the rating outlook on the Ba1 corporate family rating of Croatia's power company HEP, following a recent change in the outlook on Croatia, and warned about pressure on HEP's liquidity.
"This rating announcement follows our recent decision to change to negative from stable the rating outlook on the Baa3 local- and foreign-currency government bond ratings of the Government of Croatia," said Richard Miratsky, a Moody's vice president and lead analyst for HEP.
"The change of outlook also recognises pressure on HEP's liquidity arising from the demanding maturity profile of its debt facilities that in turn reflects a high proportion of short-term debt and the need for the company to finance its sizeable investment programme," he added.
Given its 100% ownership by the government, HEP's Ba1 corporate family rating incorporates a 2-notch uplift for potential government support to its standalone credit quality, Moody's said.
"Given the negative outlook on the rating of the Government of Croatia, any downgrade in the rating of Croatia would also likely result in a downgrade in the rating of HEP," the agency added in a statement.
Moody's also pointed to limited potential for a rating upgrade of HEP over the medium term and to possible "downward pressure if the pressure on the company's liquidity intensifies or its credit profile weakens materially."
