Research Update: ENGIE SA Rating Lowered To 'BBB+' On Less-Resilient Business Amid Looming Recession; Outlook Stable

Given a sharper looming European recession amidst the COVID-19 pandemic, ENGIE SA's earnings (€10.4 billion EBITDA as of fiscal 2019) will likely decline due to weaker operating conditions in its Client Solutions and Merchant Power businesses, whereas we were expecting some growth before the crisis. S&P Global Ratings believes the dividend suspension in 2020 and some likely cuts in investments will not be enough to offset the resulting deterioration of ENGIE's credit metrics, which were already below our expectations at year-end 2019. We are lowering the long- and short-term issuer credit ratings to 'BBB+/A-2' from 'A-/A-1' and junior rating from 'BBB' to 'BBB-' to reflect growing operating pressures and the sustainably weaker credit metrics. Our stable outlook reflects our expectations

...- Given a sharper looming European recession amidst the COVID-19 pandemic, ENGIE SA's earnings (10.4 billion EBITDA as of fiscal 2019) will likely decline due to weaker operating conditions in its Client Solutions and Merchant Power businesses, whereas we were expecting some growth before the crisis. - S&P Global Ratings believes the dividend suspension in 2020 and some likely cuts in investments will not be enough to offset the resulting deterioration of ENGIE's credit metrics, which were already below our expectations at year-end 2019. - We are lowering the long- and short-term issuer credit ratings to '###+/A-2' from 'A-/A-1' and junior rating from '###' to '###-' to reflect growing operating pressures and the sustainably weaker credit metrics. - Our stable outlook reflects our expectations that the group's earnings will progressively recover from 2021 and will be able to sustain credit metrics in line with the '###+' rating, including funds from operations (FFO) to net debt staying...

Research Update