MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has placed on Rating Watch Negative the following ratings of Sigma Alimentos, S.A. de C.V. (Sigma):
--Foreign currency Issuer Default Rating (IDR) of 'BBB-';
--Local currency IDR of 'BBB-';
--USD450 million senior notes due 2018 of 'BBB-';
--USD250 million senior notes due 2019 of 'BBB-'.
--National scale long-term rating of 'AA(mex)';
--Local Certificados Bursatiles Issuances of 'AA(mex)'.
These rating actions follow Sigma's announcement that it has filed a tender offer for 100% of the equity shares of Campofrio Food Group, S.A. (Campofrio). The enterprise value of the EUR1.1 billion transaction is expected to be initially funded with a committed term loan. The transaction is expected to be closed in the first quarter of 2014. Campofrio is a leading processed meat company in Europe with sales and normalized EBITDA of EUR1.9 billion and EUR147 million, respectively. The company's most important operations are located in Spain and France.
From a business perspective, Fitch views positively the increased geographical and currency diversification that Campofrio will bring to Sigma. The company has historically shown a track record of doing debt funded acquisitions and returning to its target capital structure within a short period of time. While Sigma's final ownership in Campofrio is pending on the results of the tender offer, the transaction will be significantly leveraging to Sigma assuming a 100% participation in the tender. Proforma net leverage should increase to approximately 3.4x from 1.8x for the last 12 months as Sep. 30, 2013. Fitch does acknowledge that Sigma intends to issue equity and proceeds may be used to deleverage the company. Otherwise, they will need to use free cash flow to reduce leverage to the company's target of net debt to EBITDA below 2.5x.
RATING SENSITIVITIES
The Negative Rating Watch will be solved once the final results of the tender are known as well the final capital structure in the medium to long term. Fitch will also assess the speed and way of deleveraging of the company and will view positively a successful initial public offering (IPO).
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013);
--'National Ratings Criteria' (Oct. 30, 2013);
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=808117
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.