NEW YORK--(BUSINESS WIRE)--This announcement corrects the version published on February 18, 2011.
Fitch Ratings has upgraded the foreign and local currency IDRs and outstanding debt ratings of Brazilian Conglomerate Camargo Correa S.A. (Camargo) as follows:
Camargo:
--Foreign Currency IDR to 'BB+' from 'BB-'; Outlook Stable;
--Local Currency IDR to 'BB+' from 'BB-'; Outlook Stable:
--National Scale rating to 'AA(bra)' from 'A+(bra)'; Outlook Stable:
--BRL300m Debentures Series 1 (due 2012) to 'AA(bra)' from 'A+(bra)';
--BRL700m Debentures Series 2 (due 2014) to 'AA(bra)' from 'A+(bra)';
--National Short-term credit rating to 'F1+(bra)' from 'F1(bra)';
--BRL3bn commercial paper (CP) second issuance to 'F1+(bra)' from 'F1(bra)'.
CCSA Finance Limited:
--USD250msenior unsecured bonds due 2016 upgraded to 'BB+' from 'BB-'.
Fitch has also assigned foreign and local currency Issuer Default Ratings (IDRs) to CCSA Finance Limited at 'BB+' with a Stable Outlook.
CCSA Finance Limited is wholly-owned by Camargo and incorporated in the Cayman Islands. Camargo unconditionally guarantees CCSA Finance Limited's debt. CCSA Finance Limited's ratings have been directly linked to those of Camargo through Fitch's parent and subsidiary methodology.
The ratings upgrade reflects Camargo's success at reducing debt incurred for its acquisition of stakes in VBC Energia and CIMPOR during 2009 and 2010. The key driver of debt reduction was the company's recent sale of its 4.5% stake in Itausa for BRL2.7bn. Itausa is the holding company that controls Itau Unibanco, Brazil's largest non-government bank. The proceeds will primarily be used to repay a BRL3bn commercial paper obligation due during March 2011. Camargo is expected to continue to reduce debt and improve its liquidity through the sale of additional non-core assets. This is viewed positively by Fitch as it should enhance the company's focus on its key businesses.
Camargo's credit ratings take into consideration the company's diversified portfolio of operations, solid market position in the industries in which it participates, and the positive outlook for its core businesses. The ratings also take into consideration adequate liquidity following the asset sales. Camargo relies on dividends, interest and principal payments from operating subsidiaries to service its debt. Approximately 50% of the dividends received are from companies non-fully controlled by Camargo. The structural subordination of Camargo's holding company debt relative to the dividend payments of these companies is considered in the company's credit ratings.
The Stable Outlook reflects Fitch's expectations that Camargo's core businesses will perform well during 2011 and that the company will continue to receive a healthy flow of dividends from its operating subsidiaries and its equity investments.
Camargo is Forecast to have Strong Revenue and Profitability Growth during 2011:
Camargo's consolidated revenues for the last 12 months (LTM) ended June 30, 2010 were BRL16.7bn, an increase of 6% over the company's revenues in 2009. Camargo's consolidated EBITDA for the LTM ended in June 2010 was BRL3.5bn, which compares positively with the company's EBITDA levels of BRL3.1bn and BRL2.9bn during 2009 and 2008, respectively. The ratings incorporate an expectation that Camargo's EBITDA for 2010 should be around BRL3.3bn and that it will grow by about 15% during 2011. The projected increase during 2011 is supported by the expectation of a strong performance of the company's cement and construction businesses. A favorable macroeconomic environment in Brazil should also result in healthy dividends from the company's investments in energy and highway concessions.
As of June 30, 2010, Camargo had BRL15.8bn of consolidated gross debt, an increase from BRL10.8bn at December 31, 2009. Camargo's debt consists of BRL10.7bn of bank loans, BRL4.7bn of debentures, and BRL539m of debt related to acquisitions. The company's consolidated cash position as of June 30, 2010, was BRL3.7bn, resulting in a net debt position of BRL12.1bn. Camargo's net debt is projected to be below BRL11bn during 2011, resulting in a net leverage range of about 2.75x to 3.00x.
Leverage at Camargo Should Decline Sharply in 2011:
The ratings factor in the expectation that Camargo's holding company debt will significantly decline during 2011, as cash flow from asset disposals and dividends received will be primarily used to repay debt. As of June 30, 2010, Camargo had BRL6.4bn of holding company debt, an increase from BRL2.5bn as of December 31, 2009. Cash held by the holding company at the end of June was BRL195m, resulting in a net debt position of BRL6.2bn. The company also had about BRL500m of cash at is non-operating, offshore subsidiaries.
Camargo's holding company debt consists primarily of bank loans, debentures, and obligations for acquisitions. Assets disposal during 2011 are expected to generate proceeds of more than BRL3bn, while dividend inflows from subsidiaries are expected to be in the range of BRL1.1bn. This should reduce the holding company's net debt to approximately BRL3.5bn (including cash held in non-operating offshore companies). This would result in a holding company leverage ratio, as measured by dividends received to holding company debt, of about 3.0x during 2011. This ratio is expected to improve to around 2.5x during 2012 as dividends received are expected to increase.
Camargo's Credit Ratings are Supported by the Strong Business and Financial Profile of its Cement and Construction Subsidiaries:
The ratings incorporate the solid credit profile of Camargo's fully controlled subsidiaries Camargo Correa Cimentos S.A. (Camargo Cimentos) and Construcoes e Comercio Camargo Correa S.A. (CCCCSA). Combined, these two companies represent the main source of dividend inflow from Camargo's fully controlled subsidiaries. They distributed approximately BRL400m of dividends to Camargo in 2010.
Camargo Cimentos's operational performance during the LTM ended June 30, 2010 is solid and reflects its important 10% and 45% market share in the Brazilian and Argentinean cement markets. Fitch views Camargo Cimentos' market positions as solid and sustainable in the medium-term supported by the company's brand recognition (Caue and Loma Negra brands) and scale of operations, with approximately 12 million cement tons sold per year. During the LTM ended June 30, 2010, Camargo Cimentos' consolidated EBITDA and EBITDA margins were BRL602m and 24.4%, respectively. At the end of June, the company's total cash and debt positions were BRL398m and BRL1.3bn, respectively. Net leverage, measured by the Net Debt / EBITDA ratio, was 1.4X. Camargo Cimentos' FCF (cash flow from operations less capital expenditures less distributed dividends) for the LTM June 2010 was positive at approximately BRL257m.
CCCCSA has a solid market position as one of the leading engineering and construction companies in Latin America. It is Camargo's second most important subsidiary in terms of revenues (approximately BRL5 billion). During the LTM, CCCCSA's consolidated EBITDA and EBITDA margins were BRL654m and 13%, respectively. At the end of June, CCCCSA had BRL386m of cash and BRL1.1bn of debt. Net leverage, measured by Net Debt / EBITDA, was 1.0X. CCCCSA's FCF for the LTM June 2010 was minus BRL959mdue to increasing working capital needs.
Significant Dividend Inflow from Non-controlling Businesses Expected to Remain Stable at About BRL500 million in 2011:
Camargo's indirect participations of 25.6% and 17% in CPFL Energia S.A. (CPFL Energia) and Companhia de Concessoes Rodoviarias S.A. (CCR) provide additional support to the ratings. During 2010, Camargo's indirectly received approximately BRL500m of dividends from these businesses. The ratings incorporate an expectation that the company will continue to receive similar levels of dividends in the near- to medium-term.
CPFL's 'AA+(bra)' national scale long-term rating reflects the Brazilian energy sector's positive trend as well as the company's solid credit profile. During the LTM September 2010, CPFL's consolidated EBITDA and EBITDA margins were BRL3.3bn and 29.5%, respectively. At the end of September, CPFL's total cash and debt were BRL1.2bn and BRL8.8bn, respectively. Net leverage, as measured by Net Debt / EBITDA, was 2.4X. During the LTM ended in September 2010, CPFL's cash flow from operations (CFFO), capex, and distributed dividends were BRL2.5bn, BRL1.6bn, and BRL1.4bn, respectively. This resulted in a negative FCF of BRL505m.
CCR's 'A+(bra)' national scale long-term rating reflects the company's strong liquidity position and low level of debt. CCR also enjoys a leading position within the transportation industry. During the LTM ended September 30, 2010, CCR's consolidated EBITDAR and EBITDAR margins were BRL2.4bn and 60.1%, respectively. At the end of September, CCR's total cash and adjusted debt were BRL1.2 bn and BRL7.9bn, respectively. The company's net leverage, as measured by Net Debt/ Adjusted EBITDAR ratio, was 2.8X. During the LTM, CCR generated BRL1.1bn of EBITDAR. It had capital expenditures of BRL1.0bn and distributed BRL853mof dividends, resulting in a negative FCF of BRL830m.
Additional information is available at 'www.fitchratings.com'.
The ratings reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include:
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 13, 2010);
--'Liquidity Considerations for Corporate Issuers' (June 12, 2007);
--'Rating Industrial Investment Holding Companies' (May. 22, 2008);
--'Parent and Subsidiary Rating Linkage' (June 19, 2007).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646
Liquidity Considerations for Corporate Issuers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666
Rating Industrial Investment Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=387412
Parent and Subsidiary Rating Linkage Criteria Report
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=534826
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