RPT-Fitch Expects to Rate Sul America S.A.'s Second Debenture Issuance 'AA(bra)'

jueves 6 de marzo de 2014 10:07 GYT

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March 6 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings expects to assign a 'AA(bra)' Long-term National Rating to Sul America S.A.'s (SASA) issuance of simple, unsecured and non-convertible debentures.


The expected rating of the second debenture issuance is one notch below the Long-term National Rating of SASA and equivalent to the existing rating of the first debenture issuance. As per Fitch's rating criteria, the one notch difference reflects the typical notching in a 'moderate' regulatory environment where the baseline recovery is 'below average'. The final rating is contingent upon the receipt of final documents conforming to the information already received.

The second debenture issue will be up to BRL750 million with a minimum amount of BRL500 million and 'hot issue' and 'green shoe' of up to 35% of the total amount of the issuance. There will be up to three tranches. The expiry of the first two tranches will be five years and that of the third tranche will be eight years. Interest payments will be annual. The amortization of the principal of the first two tranches will be from the third year onward, while that of the third tranche will start in the sixth year. The interest rates will be determined at the time of the issuance and will correspond to a percentage of the interbank deposit rate (DI) (first two tranches) and a percentage added to the internal rate of return on treasury notes (NTN-B) expiring in 2020 (third tranche). Consequently, SASA's financial performance will be more susceptible to changes in interest rates.

The first tranche will be offered for exchange to the holders of the first debenture issuance. The proceeds will be used for 1) prolonging the maturity profile of debt; 2) finance working capital to support growth; 3) supporting liquidity levels and allowing cushion for potential investments for expansion of operations and consolidation of the company's position; and 4) general corporate purposes.

At September 2013, SASA's financial debt-to-equity and interest coverage (operating income-to-interest on debt) ratios were comfortable at 14.6% and an estimated 8.3 times, respectively. The extent of the change in these ratios will depend on the final amount of the issue, but Fitch expects them to remain adequate for the ratings. However, in case the final issue amount reaches the highest level possible, SASA's leverage ratios could deviate from the median guidelines for the rating category.   Continuación...