MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed Metrofinanciera, S.A.P.I. de C.V.'s (Metrofinanciera) foreign and local currency, long- and short-term, Issuer Default Ratings (IDRs) at restrictive default status ('RD'), since the proposed debt exchange that was approved by its senior unsecured bondholders and shareholders in 2012 is pending full completion yet.
Fitch also affirms Metrofinanciera's long-term and short-term national scale ratings at 'D(mex)'. Metrofinanciera's support rating and support rating floor of '5' and 'NF' have been affirmed and simultaneously withdrawn. A complete list of ratings is provided at the end of this release.
Key Rating Drivers
Metrofinanciera's ratings remain on default status because the debt exchange that was proposed and approved in 2012 has not yet been fully completed. At present, roughly 75% of the METROFI 10 bonds have been exchanged for the combination of new senior notes (METROFI 12), subordinated notes (METROFI 12-2), and equity shares. Therefore, a relatively large portion of the METROFI 10 bonds remains undeterred.
Rating Sensitivities
Fitch expects to revise Metrofinanciera's IDRs and national-scale ratings to the appropriate level for the post-exchange capital structure and the entity's future prospects as soon as the exchange process is completed in a greater degree. Fitch will review these ratings when more than 90% of the METROFI 10 bonds have been tendered and exchanged.
Credit Profile
Following the approval of the 2012 debt exchange, Metrofinanciera's capital and liquidity position improved, due to the better debt conditions and the increased capital from the partial write-off of senior notes. However, there are still ample challenges remaining for Metrofinanciera in terms of a hefty base of non-earnings assets, weak profitability, and the still difficult operating and competitive environment.
Metrofinanciera had previously completed another debt exchange in 2010, but the senior unsecured bonds that arose at that time (METROFI 10) were posed to materially drain the company's liquidity once the two year grace period on these bonds' interest and principal payments ended in September 2012, which triggered the need to seek a second restructuring. In exchange for the METROFI 10 notes, bondholders are receiving a combination of equity (30%), unsecured subordinated bonds (15%) and new senior unsecured notes (55%, 'METROFI 12').
In Fitch's opinion, the latest debt exchange is positive for Metrofinanciera's future financial prospects. The capital base has been strengthened, while the company has been able to absorb a haircut on the book value of its ample non-earning land properties. More importantly, liquidity risk has been largely mitigated, since the METROFI 12 bonds have a two year grace period on interest payments, and a significantly more benign amortization schedule, given that principal payments will be contingent on Metrofinanciera's cash flow capacities.
Other than the new unsecured bonds, Metrofinanciera's liabilities are largely associated to credit lines from the local development bank Sociedad Hipotecaria Federal (SHF), which Fitch considers that also have benign term conditions and do not materially affect Metrofinanciera's refinancing risk.
Fitch has taken the following rating actions:
Metrofinanciera, S.A.P.I. de C.V.:
--Foreign and local currency long-term IDR affirmed at 'RD';
--Foreign and Local Currency Short-term IDR affirmed at 'RD';
--Support Rating affirmed at '5' and withdrawn;
--Support Rating Floor affirmed at 'NF' and withdrawn;
--Long-term national-scale issuer rating affirmed at 'D(mex)';
--Short-term national-scale issuer rating affirmed at 'D(mex)'.
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
-- Global Financial Institutions Rating Criteria (Aug 15, 2012);
-- Distressed Debt Exchange Criteria (Aug. 2, 2013);
-- National Ratings Criteria (Jan. 19, 2011).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Distressed Debt Exchange
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715005
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=803362
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