Fitch Downgrades Homex's Ratings to 'RD'

MONTERREY, Mexico & NEW YORK--()--Fitch Ratings has downgraded Desarrolladora Homex, S.A.B. de C.V.'s (Homex) ratings as follows:

--Foreign currency Issuer Default Rating (IDR) to 'RD' from 'C';
--Local currency IDR to 'RD' from 'C'.

The company's notes have been affirmed as follows:

--USD250 million in senior notes due 2015 at 'C/RR4';
--USD250 million in senior notes due 2019 at 'C/RR4';
--USD400 million in senior notes due 2020 at 'C/RR4'.

The notes and IDR ratings have been removed from Rating Watch Negative. The 'C/RR4' rating of the notes reflects non-performing notes that have anticipated recoveries in the range of between 30% and 50%.

KEY RATING DRIVERS
The downgrades follow Homex's announcement that it did not make the interest payment which was due June 11, 2013 on its senior notes due 2019, during the 30-day grace period.

Homex reports combining financial information as of Dec. 31, 2012, which raised concerns about the creation of large intercompany loans/transactions by the company during 2012. Fitch has not been able to ascertain the exact details of the intercompany loans/transactions between Homex, its guarantor subsidiaries, and its non-guarantor subsidiaries. These loans/transactions have the potential to hurt recoveries of external creditors in the event they are treated pari passu by a Mexican bankruptcy court, as this gives Homex's existing shareholders a significant say in a potential debt restructuring.

Fitch notes that between Dec. 31, 2011 and Dec. 31, 2012, Homex's non-guarantor subsidiaries reported a MXN17.5 billion increase in the balance sheet line entitled 'due from related parties' and a MXN20.6 billion increase in the balance sheet account line 'due to related parties'. During the same time period, these balance sheet lines for Homex and its guarantor subsidiaries grew by MXN9.9 billion and MXN7.1 billion, respectively. Upon consolidation, Homex reports no figure under the category of 'due to related parties' and only MXN56 million of obligations under the 'due from related parties' category. As of Dec. 31, 2012, Homex had MXN20.7 billion of consolidated debt.

RATING SENSITIVITY
The company's IDRs and debt ratings will be revised once the company announces and executes the next steps related to its debt restructuring process.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology', Aug. 8, 2012;
--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers', Nov. 13, 2012.
--'2013 Outlook: Mexican Homebuilders', Dec.19, 2012;
--'Fitch Places Mexican Homebuilders on Rating Watch Negative', Feb. 22, 2012.

Applicable Criteria and Related Research:
2013 Outlook: Mexican Homebuilders
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696675
Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693773
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=796169
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Contacts

Fitch Ratings
Primary Analyst
Indalecio Riojas, +52 81 8399 9100
Associate Director
Fitch Mexico S.A. de C.V.
Edificio Connexity, Prol. Alfonso Reyes No. 2612, Piso 8
Col. Del Paseo Residencial
Monterrey, Mexico 64920
or
Secondary Analyst
Jose Vertiz, +1-212-908-0641
Director
or
Committee Chairperson
Sergio Rodriguez, CFA, +52 81 8399 9100
Senior Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Indalecio Riojas, +52 81 8399 9100
Associate Director
Fitch Mexico S.A. de C.V.
Edificio Connexity, Prol. Alfonso Reyes No. 2612, Piso 8
Col. Del Paseo Residencial
Monterrey, Mexico 64920
or
Secondary Analyst
Jose Vertiz, +1-212-908-0641
Director
or
Committee Chairperson
Sergio Rodriguez, CFA, +52 81 8399 9100
Senior Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com