MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has downgraded the ratings of Controladora Mabe, S.A. de C.V. (Mabe) as follows:
--Foreign currency Issuer Default Rating (IDR) to 'BB+' from 'BBB-';
--Local currency IDR to 'BB+' from 'BBB-';
--6.5% senior unsecured notes due 2015 to 'BB+' from 'BBB-';
--7.875% senior unsecured notes due 2019 to 'BB+' from 'BBB-'.
The Rating Outlook has been revised to Stable from Negative.
The ratings downgrade reflects a decline in the company's credit metrics from historical levels and from Fitch's previous expectations. EBITDA generation and margins have been pressured by the realignment of the Brazilian operations which have required more time than expected, as well as extraordinary charges since the BSH acquisition in 2009. Additional pressures on the company's profitability are related to external factors, such as increased commodity prices and currency fluctuations. Mabe's management has implemented strong initiatives to optimize working capital which in turn allowed the company to reduce debt; nevertheless, this reduction was offset by lower EBITDA generation.
The Stable Outlook incorporates Fitch's view that Mabe's financial profile and main credit metrics will remain relatively similar in current levels.
Mabe's ratings factor in its product and geographic diversification, leading market shares in the countries where it operates, as well as the company's long relationship and joint venture with General Electric (GE). Fitch expects Mabe will invest to optimize its manufacturing capacity during the year. In addition, Fitch expects Mabe's Brazilian operations to start contributing positive results during 2012 once investments and operating rationalization is completed.
On a comparable basis, reflecting only the company's proportional participation in Mabe Brazil (58.6%), during the last 12 months (LTM) ended Sept. 30 2011 Mabe's revenues were USD3.2 billion, similar to year-end 2010 but below USD4.2 billion registered in 2008. Similarly, according to Fitch's calculations EBITDA for 2011 will be of approximately USD230million, down from USD392 million in 2008. EBITDA Margin has followed the same trend and for the LTM in September 2011 was 7.7% compared to 7.8% at year end 2010 and 9.3% in 2008.
Mabe's cash flow management efforts allowed it to reduce working capital during 2011 and in turn, reduce debt levels to USD700 million from USD798 million at year end 2010. On the other hand, Fitch estimates the company's leverage measured by Total Debt to EBITDA for 2011 to be approximately 3.0 times (x), compared to 3.2x and 2.7x in December 2010 and 2009, respectively. Fitch expects that Mabe's leverage ratio will remain around 3.0x reflecting a challenging operating environment and the company's capex plan.
Mabe's liquidity and refinancing risk is low. During 2011 the company signed a USD150 million bilateral bank facility with final maturity in 2014 that was used to refinance short term debt and extend its debt maturity profile. As of Sept. 30, 2011 Mabe's total debt was comprised by this facility, USD200 million in senior notes due in 2015 and USD350 million in senior notes due in 2019. The debt amortization schedule is manageable for the company with only USD26 million due in 2012 and USD86 million in 2013. Cash balances at the same date were USD90 million.
Factors that could result in positive rating actions include a combination of consistent improvement in credit metrics of interest coverage and gross leverage, in addition to maintaining good liquidity. Conversely, further deterioration in profitability, cash flow generation and credit metrics could pressure the company's ratings.
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. 12, 2011
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229
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