Ratings agency Moody’s regards the new parent company of Cadent, which has acquired National Grid’s gas distribution networks, as “weak investment grade”, it said, announcing a ratings downgrade from A3 to Baa1 for Cadent.
Moody’s noted the very low business risk of gas distribution networks. But it said the new owner’s rating is constrained by its parent company, and because of “Cadent’s track record of weak delivery on regulatory outputs”.
The rating agency noted significant gearing at Cadent’s immediate parent company, Quadgas MidCo Limited. The Quadgas financing structure protects only a weak investment grade rating for the consolidated group, Moody’s said, but it regards restrictions on further gearing and GB regulatory ring-fencing provisions “as providing Cadent with significant insulation from the credit quality of its parent. As a result, the ratings of Cadent and Cadent Finance plc are able to pierce the group’s consolidated credit quality by two notches.”