Industria / Motor
- Category: Industria
- Published on 17 September 2014
Fitch Ratings has downgraded the foreign and local currency Issuer Default Ratings (IDRs) of Industrias Metalurgicas Pescarmona S.A.I.C. y F. (IMPSA), WPE International Cooperatief U.A. (WPEI), and the companies' ultimate holding company, Venti S.A. (Venti) to 'C' from 'CCC'.
These rating actions affect IMPSA's USD225 million senior unsecured international bonds due October 2014 and WPEI's USD390 million senior unsecured international bonds due September 2020. The bonds' ratings are being downgraded to 'C/RR4' from 'CCC/RR4'.
Fitch has also removed IMPSA, WPEI and Venti from Rating Watch Negative.
KEY RATING DRIVERS
Interest Payment Postponement
The company's decision to postpone its interest payment is the main driver for Fitch's ratings downgrade. On Sept. 15, 2014, IMPSA announced to the Argentine Comision Nacional de Valores (CNV) that it will be postponing interest payments corresponding to its local ON Class 10/11 local bond obligations due Sept. 18, 2014. Furthermore, the company declared that it is postponing its interest/principal payments on all outstanding notes and its other obligations with financial creditors. This announcement follows the company's delayed interest payments the company disclosed to the CNV on June 25, 2014. On that occasion, the company made its payments for the local ON Class 8/9 bonds with a one week delay.
The downgrade also reflects the company's stretched liquidity and inability to meet its financial obligations. At the IMPSA level, which encompasses the company's Argentina business, the company's cash and marketable securities were equivalent to USD28 million as of year-end (YE) 2013 versus short-term debt obligations of USD411 million or 7% of short-term obligations. As of second quarter of 2013 (2Q'13), cash and marketable securities declined to USD8 million while short-term debt obligations of USD444 million means cash and equivalents declined to 2% as a percentage of short-term debt.
At the Venti S.A. holding company level, the company's cash position is still stretched, though relatively better than at the IMPSA operating company level, as it held USD50 million in cash which is 17% of USD299 million in short-term debt as of 1Q'14. The company's financial strategy has revolved around meeting its debt obligations with a mix of cash from operations and the rollover of existing debt, however, IMPSA's recent struggle to make minor interest payments demonstrates difficulties in raising additional financing to roll-over its obligations.
Meaningful debt payments for the company in September total approximately USD45 million including USD9 million in interest/amortization payments for its local bonds due in September and a USD20 million amortization payment on its WPEI international bond also due in September. As previously noted by Fitch in its press release dated July 24, 2014, 'a failure to make these payments could trigger a subsequent ratings downgrade'. Hence yesterday's announcement that IMPSA will postpone its payments on financial obligations, combined with the company's weak liquidity, is the driver for Fitch's latest rating action.
Difficulties in Brazil; Low Credit Profile Offtakers
IMPSA's previous ratings incorporated the company's growing business presence in Brazil. However, the company's Argentine operations continue to be a significant driver for free cash flow generation at the company while Fitch estimates that the Brazilian operations are negatively impacting cash flow at the company. The company's high leverage, aggressive capital expenditure program and its backlog concentration on a few large projects in developing countries has contributed to the company's current difficulties. Corpoelec (IDR rated 'B'; Outlook Negative by Fitch) in Venezuela is among the companies that IMPSA needs to rely upon.
Ratings Reflect Recent Reorganization
The rated international notes are held at the WPEI and IMPSA entity levels. WPEI is a direct subsidiary of Wind Power Energia S.A. (WPE), which in turn is wholly owned by Venti S.A. In 2014, the company reorganized under a new corporate structure, whereby Venti S.A. is the overall holding company separately owning 100% of WPE in Brazil and 100% of IMPSA in Argentina. Previously, IMPSA owned 100% of WPE, but with the 2014 reorganization the Brazilian and Argentinian businesses were put under separate umbrellas. Given the reorganization, Fitch has identical IDR ratings for the holding company, Venti, IMPSA, and WPEI.
The WPEI international notes are irrevocably and unconditionally guaranteed by Venti, IMPSA and WPE on a senior unsecured basis. WPEI's ratings reflect the credit levels of the guarantors. The IMPSA international notes' ratings also reflect the credit levels of its guarantor, Venti S.A. The 'C' IDR assumes all WPEI and IMPSA's future debt issuances would be fully and unconditionally guaranteed by IMPSA, WPE and Venti S.A.
The company's ratings could be downgraded if the company defaults on its scheduled amortization/interest payments and/or does not fulfil its financial obligations following the late-payment grace period.
An upgrade is unlikely at this time given the company's difficulties meeting its payment obligations.
Autor > LA Herald Tribune