NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the Issuer Default Rating (IDR) and outstanding debt ratings of Grupo de Inversiones Suramericana S.A. (GRUPO SURA) and its special-purpose vehicle Gruposura Finance as follows:
GRUPO SURA
--Foreign currency IDR at 'BBB-';
--Local currency IDR at 'BBB-';
--COP250.000 million local unsecured bonds due 2019-2049 at 'AAA(Col)'.
Gruposura Finance
--Foreign currency IDR at 'BBB-';
--Local currency IDR at 'BBB-';
--USD300 million senior unsecured bonds due 2021 at 'BBB-'.
Gruposura Finance is a special-purpose vehicle wholly owned by GRUPO SURA and incorporated in the Cayman Islands. Its debt is unconditionally guaranteed by GRUPO SURA.
The Rating Outlook is Stable.
GRUPO SURA's ratings reflect the credit quality and diversification of its investment portfolio, the solid market position and the medium-term outlook in the industries for each of the businesses incorporated in its investment portfolio. Further factored in the company's ratings are its historical low leverage ratios, a growth strategy that includes merger and acquisitions activity, as well as GRUPO SURA's track record of funding its inorganic growth with adequate combinations of equity and debt.
The credit ratings of GRUPO SURA also incorporate the structural subordination of the holding company's debt to the debt at its operating companies. An additional constraint upon the rating is GRUPO SURA's low cash holdings at the holding company level.
The Stable Outlook reflects the view that GRUPO SURA will maintain adequate liquidity levels and a moderately leveraged capital structure stable during 2013.
KEY RATING DRIVERS
Expected 2013 Received Dividends Around USD280 Million:
The ratings consider the diversification and credit quality of GRUPO SURA's dividend flow with approximately 75% of the company's dividend receipts expected to continue coming from its financial services business segment during the next several years. During 2012, GRUPO SURA received USD234 million of dividends, which was in line with the expectations previously incorporated in the ratings. The company's 2012 dividends received came from Bancolombia S.A. (Bancolombia), Sura Asset Management (SUAM), Grupo Nutresa S.A. (Nutresa), Grupo Argos S.A. (Grupo Argos), Suramericana S.A., y Proteccion S.A. with participations of 37%, 23%, 13%, 11%, 8%, and 3%, respectively. During 2013, GRUPO SURA is expected to receive USD280 million of dividends. The split amongst subsidiaries is expected to be similar to 2012.
Adequate Debt Service Coverage:
GRUPO SURA's cash inflow before debt amortization, including received dividends and non-strategic asset sale, was USD464 million in 2012. This figure compares with USD213 million of cash outflows, which consists of USD129 million in dividends paid, USD46 million in salaries and administrative expenses, and USD44 in interest expense. The company's 2012 net operational flow before debt amortization - measured as total cash inflow minus total cash outflow - of USD250 million was used to reduce debt. During 2013, GRUPO SURA's operational cash outflow is expected to be around USD170 million.
As of March 31, 2013, GRUPO SURA's USD568 million of total debt was composed primarily of USD136 million in local bonds and USD300 million in senior notes due in 2021. The company faces debt principal payments of USD165 million in 2013, which are expected to be primarily covered with dividends received from subsidiaries.
Net Leverage Stable:
GRUPO SURA lowered its net debt to USD568 million as of March 31, 2013 from USD1.382 million as of Dec. 31, 2011. This leverage reduction was in line with expectations previously incorporated in the ratings. The decline in debt was due to an equity increase, the incorporation of co-investors participating in the ING assets, additional proceeds generated through the selling of non-core assets, and the improvement in the company's net cash inflow.
The company's net financial leverage, measured by the ratio of total net debt to dividends received was 2.3x as of March 31, 2013. GRUPO SURA's financial leverage is expected to remain stable during 2013. Net debt should be around USD530 million at the end of 2013 and net financial leverage should remain around 2.0x during 2013.
Low Liquidity Compensated by Alternatives Sources:
The company's liquidity is viewed as weak and is not expected to materially change over the short to medium term. As of March 31, March 2013, GRUPO SURA's had a USD12 million liquidity position (cash and marketables security). The low level of cash is partially balanced by alternative sources of liquidity that the company could access if required. These alternative sources of liquidity include: uncommitted unused credit lines for approximately USD1.5 billion, the potential sale of minorities stakes - without affecting its controlling position - in its investment portfolio that could reach a total of up to USD2 billion, and strong access to international and local bond markets.
RATING SENSITIVITIES
The ratings incorporate the expectation that GRUPO SURA will maintain stable leverage and liquidity metrics during 2013. Over the medium term, the ratings incorporate the view that GRUPO SURA's leverage metrics, measured as total net debt to received dividends will remain around 2.0x.
Fitch would view the development of the regional macroeconomic environment in which the company operates as positive for credit quality. Other positive factors include an improved performance of the company's operating assets and a significant improvement in the company's net financial leverage.
Fitch would view a combination of the following as negative to credit quality: the company's lack of capacity or willingness to maintain its net financial leverage in line with those levels incorporated in the ratings; adverse macroeconomic trends leading to weaker credit metrics; debt-funded acquisitions and/or a change in the company's dividend payment strategy. Grupo Sura's banking and asset management businesses - through Bancolombia and SUAM - are in the processes of executing recently announced acquisitions. The ratings incorporate the expectations that these acquisitions will be neutral to Grupo Sura's credit quality and will not change the amount of dividends being distributed by these companies.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' Aug. 8, 2012;
--'National Ratings Criteria' Jan. 19, 2011.
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793059
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