MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed DAK Americas LLC's (DAK) Long-Term Issuer Default Rating (IDR) as well as its senior unsecured debt at 'BBB-'. The Rating Outlook is Stable.
The rating affirmation follows Fitch's recent affirmation of Alpek, S.A.B. de C.V.'s (Alpek) and Grupo Petrotemex, S.A. de C.V.'s (Petrotemex) local and foreign currency IDRs at 'BBB-' with a Stable Outlook.
Under Fitch's approach to rating entities within a corporate group structure, Alpek, Petrotemex and DAK are rated the same, as the linkage among them is considered strong. Some of the factors for the strong linkage include the integration of operations and management as well as debt guaranteed by the subsidiary and cross-default provisions.
KEY RATING DRIVERS
Alpek's ratings reflect its strong business profile in the petrochemical segment in Mexico and the Americas, supported by leading positions in its different product lines, especially in the polyester chain in North America; low cost structure as a result of important investments in technology, as well as geographic location and scale; solid customer base and end-markets' resilience to economic downturns. The ratings consider the company's solid financial profile characterized by constant positive free cash flow generation and low leverage. Fitch expects Alpek's ratio of net debt-to-EBITDA for the long term to be around 1.5x. Also incorporated in the company's ratings are the cyclical nature of the industry, strong competitive environment, and Alpek's historical acquisition track record.
RATINGS SENSITIVITIES
A negative rating action could arise from a combination of sharp and consistent reductions in volumes, profitability and cash flow generation resulting in lower fixed-cost absorption and weaker main credit metrics. A larger than expected debt-financed acquisition that moves the company's capital structure away from the long-term target net debt-to-EBITDA of 1.5x would also pressure the ratings.
Positive rating actions could be supported by consistent positive free cash flow generation through economic cycles and investment periods, product diversification and vertical integration across production chains, combined with the expectation of lower leverage levels in the mid-to-long term.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 05, 2013
--'Parent and Subsidiary Rating Linkage (Fitch's Approach to Rating Entities within a Corporate Group Structure)' (Aug. 05, 2013)
Applicable Criteria and Related Research:
Parent and Subsidiary Rating Linkage Fitch's Approach to Rating Entities within a Corporate Group Structure
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=714476
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=801525
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