CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the following ratings of Empresas Copec:
--Foreign and local currency Issuer Default Ratings (IDRs) at 'BBB';
--Senior
unsecured bond line No. 623 and bond program at 'AA-(cl)';
--Senior
unsecured bond line No. 624 and bond program at 'AA-(cl)';
--Long-term
national scale at 'AA-(cl)';
--Equity Rating affirmed at 'Primera
Clase Nivel 1'.
The Rating Outlook for Empresas Copec is Stable.
KEY RATING DRIVERS
Empresas Copec's ratings reflect the strong
business positions and sound credit profile of its main operating
subsidiaries Celulosa Arauco y Constitucion S.A. (Arauco, rated 'BBB'
and 'AA-(cl)' by Fitch), Compania de Petroleos de Chile S.A. (Copec) and
Abastecedora de Combustibles S.A. (Abastible). The company also
participates in natural gas distribution, energy generation and the
mining industry through minority investments in several companies and
joint ventures.
The company's recent financial performance has improved. During the latest-12-month (LTM) period ending June 30, 2013, Empresas Copec generated USD1.8 billion of consolidated EBITDA. This compares with USD6.8 billion of consolidated total debt and USD1.7 billion of cash and marketable securities, resulting in a net debt-to-EBITDA ratio of 2.8 times (x) and a total debt-to-EBITDA ratio of 3.7x. These ratios show an improvement compared to 3.6x and 4.4x, respectively as of Dec. 31, 2012.
Declining Leverage at Arauco
Arauco accounts for about 55% of
Empresas Copec's EBITDA during the LTM ended June 30, 2013. Arauco has
gradually improved its credit metrics after leveraging acquisitions in
the panels business during 2012. As of June 30 2013, Arauco's net
debt/EBITDA ratio was 3.9x, while its net adjusted debt/EBITDA ratio was
4.6x. These ratios compare with 4.7x and 5.4x, respectively, as of Dec
31, 2012. During the last 12 months (LTM) ended June 30, 2013, Arauco
generated USD987 million of EBITDA. Fitch expects Arauco's net
debt/EBITDA ratio to decline to around 3.2x by the end 2013 and below
2.5x during 2015. Key factors in Arauco's deleveraging are a more
conservative approach to capex, growth of cash flow in its panels
business, and a full ramp up of the company's new pulp mill in Uruguay,
Montes del Plata. Arauco's owns 50% of Montes del Plata, which will have
an annual output of 1.3 million tons of hardwood, will be ramped up
throughout the end of 2013 and the beginning of 2014. This mill should
increase Arauco's EBITDA by between USD175 million and USD300 million
per year depending upon pulp prices.
Copec Improves following Completion of Terpel Acquisition:
Copec is
Empresas Copec's second most important business, accounting for 32% of
its consolidated EBITDA. Copec's EBITDA is split relatively evenly
between Chile (55%) and Colombia (45%). During the LTM ended June 30,
2013, Copec's EBITDA improved to USD581 million from USD490 million
during 2012. The company was able to lower its debt to USD1.6 billion at
the end of June with the proceeds from the sale of Terpel's assets in
Chile during 2013 for USD237 million. The combination of these factors
has led to a reduction in Copec's total debt/EBITDA ratio to 2.8x from
3.9x in 2012. The company's credit profile should continue strengthening
as Copec increases its EBITDA from its Colombian operations
Low Leverage at Holding Company Level:
Empresas Copec, the holding
company, has USD370 million of debt and a strong liquidity position with
USD449 million of cash. Empresas Copec services interest expenses on its
debt with interest income it receives from its subsidiaries Copec and
Abastible. Its debt relates to two bond issuances in the Chilean market.
The first one was used to finance the Terpel acquisition during 2009.
The second issuance was placed at the end of 2011 and was used to
finance the acquisition of Inversiones Nordeste (IN) by Abastible.
Empresas Copec has shown a strong track record of receiving dividends
from its subsidiaries, Arauco, Copec and Abastible. It has also
benefited from an improvement of the operations of its minority
investment in Metrogas (39% participation). Historically, dividends
received by Empresas Copec have averaged around USD400 million per year.
During 2012, dividends received by Empresas Copec declined to USD325
million due to a weaker performance of Arauco in 2012 and a reduction of
dividends distributed by Copec.
RATING SENSITIVITIES
A positive rating action could occur if
Empresas Copec is able to return to debt levels closer to those
maintained by the company historically. A negative rating action is not
likely in the near to medium term. Arauco is considering replacing an
old pulp mill with a new line. If this project goes forward, Fitch
believes Empresas Copec's capital structure is strong enough that a
negative rating action would not be likely.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Corporate Rating
Methodology' (Aug. 8, 2013);
--'Parent and Subsidiary Rating
Linkage' (Aug. 8, 2013).
Applicable Criteria and Related Research:
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=804820
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