MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has downgraded Metrofinanciera, S.A.P.I. de C.V.'s (Metrofinanciera) foreign (FC) and local currency (LC) long- and short-term Issuer Default Ratings (IDRs) to 'RD' from 'C', following the approval of the company's debt exchange proposal to its senior unsecured bondholders. Fitch also downgraded Metrofinanciera's long- and short-term national scale ratings to 'D(mex)' from 'C(mex)'. A list of detailed rating actions follows at the end of this press release.
The 'RD' rating reflects the distressed debt exchange of the senior unsecured bonds that arose from a restructuring process completed on 2010 (METROFI 10). Following the end of the two-year grace period on these bonds on Sept. 10, 2012, when the company was originally expected to make cash interest and principal payments, Metrofinanciera proposed an exchange of these bonds to prevent deterioration of the company's financial condition.
In exchange for the METROFI 10 notes, bondholders will receive a combination of equity, subordinated bonds and new senior unsecured notes. The proposal was approved by the bondholders on Aug. 9, 2012, and the company's shareholders assembly approved in on Sept. 20, 2012. The exchange is expected to be fully completed and formalized over the 45-day period following the shareholders' approval.
Fitch considers that the senior unsecured debt exchange proposal is positive for Metrofinanciera's future prospects, but this is considered a distressed exchange under Fitch's criteria. The new unsecured bonds will have a longer tenor, another two-year grace period on interest payments, and a more benign and flexible amortization scheme, which is expected to allow Metrofinanciera to gradually restore its financial condition and reach a stronger capital position in the short run.
Other than the new unsecured bonds, Metrofinanciera's liabilities are largely associated with credit lines from the local development bank, Sociedad Hipotecaria Federal (SHF), and Fitch considers them to have benign term conditions and do not materially affect Metrofinanciera's refinancing risk. Since the 2010 restructuring, all credit lines granted by SHF have remained performing and payments have been made on a timely basis.
Over the next two weeks, Fitch will assess the effects of this debt exchange on Metrofinanciera's financial condition, in order to review its ratings and bring these up to performing status. The post-exchange rating will likely be in the low speculative grade categories, while future changes in these ratings will be contingent on Metrofinanciera's ability to restore a recurring earnings stream that prevents further depletion of its capital base, which in turn is dependent on Metrofinanciera's capacity to rebuild its business and commercial profile, and to increase the relative contribution of productive assets.
Fitch has taken the following rating actions:
Metrofinanciera:
--FC and LC Long-term IDR downgraded to 'RD' from 'C';
--FC and LC Short-term IDR downgraded to 'RD' from 'C';
--Support Rating affirmed at '5';
--Support Rating Floor affirmed at 'NF';
--Long-term national-scale issuer rating downgraded to 'D(mex)' from 'C(mex)';
--Short-term national-scale issuer rating downgraded to 'D(mex)' from 'C(mex)'.
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:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Distressed Debt Exchange Criteria' (Aug. 8, 2012);
--'Finance and Leasing Companies Criteria' (Dec. 12, 2011);
--'National Ratings Criteria' (Jan. 19, 2011).
Applicable Criteria and Related Research:
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Finance and Leasing Companies Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=659834
Distressed Debt Exchange
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685903
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