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BUENOS AIRES, Argentina--([ BUSINESS WIRE ])--Fitch Ratings has upgraded Transportadora Gas del Norte's (TGN) foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'D'. Fitch has also assigned TGN's USD170.45 million new step up notes and USD56.8 million claim protection notes a 'CCC' final rating, with a recovery rating of 'RR4'. The national scale rating was also upgraded to 'CCC(arg)' from 'D(arg)'. A detailed list of rating actions is at the end of this release.

TGN's upgraded ratings reflect the successful completion of its debt restructuring process through an exchange note offering. The company got the acceptance from bondholders representing 88.04% of the debt and issued USD150.1 million of step up notes and USD50 million of claim protection notes. Approximately USD111.4 million and USD21.9 million of such notes, respectively, are listed in the Buenos Aires stock exchange, and will be listed in Luxemburg. Following the completion of the debt restructuring, total debt has been reduced to approximately USD257 million from USD462.2 million. Existing debt includes new step up notes for USD150 million, debt remaining in default for approximately USD55 million and claim protection notes for USD50 million. Approximately USD41.3 million of series A and B have not been tendered and remain in default. TGN announced its intention to restructure such debt.

Fitch anticipates that TGN's ability to face interest payments on the new debt will be extremely limited, as the company's ability to generate cash has been severely affected by a tariff structure frozen since 1999, inflation, limitation on gas exports and peso depreciation. Fitch notes that interests are expected to be capitalized during the first three years and a portion to be capitalized in year four. However, absent a tariff increase, or any additional source of funds, TGN's EBITDA is expected to be negative in 2013 and increasing in magnitude over the next years.

The new notes carry a coupon rate that steps-up over the course of the notes of 3.5% for years one and two, 7% for years three and four, and 9% for years five through seven. The interest payment can be picked during the first three years, and there is a minimum cash interest payment of 3.5% in year four, with the option for TGN to capitalize the remainder. Principal will be amortized in full at its maturity.

The claim protection notes will be automatically cancelled on the first anniversary of the debt restructuring settlement, without any payment from TGN, provided that no event of default has occurred. Should they not be extinguished at that time, the claim protection notes will mature seven years from the final settlement date. These notes will constitute a 0% coupon instrument.

Fitch has upgraded the following ratings:

--Foreign and local currency long-term IDR to 'CCC' from 'D';

--Long-term national scale issuer rating to 'CCC(arg)' from 'D(arg)'.

Fitch has assigned the following ratings:

--USD170.45 million seven-year notes final rating at 'CCC'/'RR4';

--USD56.8 million of claim protection notes final rating at 'CCC'/'RR4';

Fitch has affirmed the following ratings:

--USD250 million notes series A, international scale affirmed at 'C/RR5';

--USD250 million notes series B, international scale rating affirmed at 'C/RR5'.

TGN is one of the two largest transporters of natural gas in Argentina, delivering approximately 40% of the country's total gas consumption. TGN has an exclusive license to operate the northern Argentina gas pipeline system for a term of 35 years, which may be extended for an additional 10-year period. The Argentine government has intervened into TGN's administration since December 2008. The designated government's interventor is responsible for supervising all actions related to the public service. TGN's main shareholders are Gasinvest S.A. (56.35%) and Blue Ridge Investments LLC (23.53%), while 20% is floating in the market. Gasinvest S.A. is in turn owned by TecPetrol Internacional SL (27.2%), Total Gas y Electricidad Argentina S.A. (20.6%), Petronas Argentina S.A. (18.3%). Total Gasandes (6.6%), and Compania General de Combustibles S.A. (27.2%).

Additional information is available at '[ www.fitchratings.com ]'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Recovery Ratings and Notching Criteria for Non-financial Corporate Issuers' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460 ]

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686476 ]

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