Fitch assigns REC's MTN Programme 'BBB-'

Fitch Ratings has assigned Rural Electrification Corp's USD 1 billion medium-term note (MTN) programme a final rating of 'BBB-'. Notes issued under the programme may be in any currency or of any tenor.

The net proceeds from each issue will be used for funding power-sector infrastructure, it said in a statement. According to the statement, the assignment of the final rating follows the receipt of documents conforming to information already received.

The final ratings are in line with the expected ratings assigned on December 22 2016. The programme's rating is aligned with REC's Issuer Default Rating on the basis that the notes issued under the programme will constitute REC's direct, unconditional and unsecured obligations rank pari passu with all its other present and future outstanding unsecured and unsubordinated obligations, it said.

REC's ratings are equalised with those of the Indian sovereign (BBB-/Stable). This reflects its public-sector status, ownership by the government of India and strong strategic state ties that result in a strong likelihood of extraordinary state support being provided if needed.

REC is therefore, classified as a credit-linked public-sector entity under Fitch's criteria, it said. REC is a public financial institution that provides funds exclusively to the Indian power-sector. The Indian government owned 60.64 per cent of REC as on 31 December 2016.

The state controls REC through its board and the Ministry of Power signs yearly memorandums of understanding with REC to set annual operational and financial performance targets, which it reviews quarterly. The Comptroller and Auditor General of India annually appoints statutory auditors for REC, it said.