Fitch Rates Posadas' Proposed Notes 'B+/RR3(EXP)'

jueves 18 de junio de 2015 11:35 GYT

(The following statement was released by the rating agency) MONTERREY, June 18 (Fitch) Fitch Ratings has assigned a 'B+/RR3(EXP)' rating to the proposed senior notes for up to USD 350 million, maturing in the range of seven to 10 years, to be issued by Grupo Posadas, S.A.B. de C.V. (Posadas). The 'RR3' Recovery Rating assigned to the proposed issuance indicates good recovery prospects given default. 'RR3' rated securities have characteristics consistent with securities historically recovering 51%-70% of current principal and related interest. The proceeds from the proposed notes will be used to refinance all or part of the notes due 2017, as well as the commercial paper issuance due November 2015. Posadas' ratings are supported by the company's solid business position as a leading hotel chain in Mexico, strong brand equity and operating performance, as well as its multiple hotel formats. Conversely, the ratings are tempered by high leverage, as well as industry cyclicality. Posadas' presence in all major urban and coastal locations in Mexico, consistent product offering and brand image have resulted in occupancy levels that are above the industry average in Mexico. The use of multiple hotel formats allows the company to target domestic and international business travelers of different income levels as well as tourists, diversifying its revenue base. KEY RATING DRIVERS IMPROVEMENTS IN OPERATIONAL PERFORMANCE Posadas has improved its operations over the last few quarters. RevPAR has improved, particularly in owned and leased hotels; this has mostly been driven by improved Average Daily Rate (ADR). Occupancy has remained stable, above 60%, although coastal locations have outperformed urban ones, both for managed, as well as owned and leased properties. Furthermore, vacation club sales have improved, as increased occupancy in coastal locations has improved cross-selling opportunities. As of LTM March 31, 2015, EBITDA was MXN1,161 million. Cash from operations (CFO) generation for the period was MXN443 million and Fitch expects continued improvement due to continued strong operating performance in the vacation club segment, as well as the main hospitality business. MODERATE CAPEX GROWTH STRATEGY Going forward, Fitch believes Posadas' strategy will be centered mostly on managing hotels, as opposed to owning the properties. New openings should continue for all brands, mainly Fiesta Inn and One, mostly under managed and leased formats. This capex strategy for new openings, with only about 16% being spent by Grupo Posadas itself could support FCF generation, which is expected to be mildly positive over the short to medium term. From 2015 to 2017, Posadas plans to open 40 hotels with a total of 6,548 rooms. KEY ASSUMPTIONS Fitch's key assumptions within the rating case for the issuer include: --Adjusted debt to EBITDAR around 4.5x in the medium term; --Consolidated EBITDA above MXN1 billion; --Broadly stable KPIs in the short-to-medium term. --Low capex growth strategy. RATING SENSITIVITIES Negative factors for credit quality could include any weakening of operating trends or decreases in RevPAR that could lead to lower EBITDA and cash flow levels, as well as cash outflows or incurring debt that results in adjusted debt-to-EBITDAR consistently higher than 5.0x. Positive factors of the company's creditworthiness include stable EBITDA generation, consolidating gains in operating indicators, and a proven track record of stronger and stable credit metrics, such as adjusted debt-to-EBITDAR consistently below 4.5x LIQUIDITY The company's liquidity position is manageable. The proposed issuance will allow for the refinancing of the USD50 million commercial paper maturity in November 2015, leaving only a remainder of the senior notes due 2017 as well as the proposed issuance as debt maturities. Cash balances as of March 31, 2014 are MXN1,043 million, Furthermore, the company's strategy considers signing committed secured credit lines of MXN550 million (MXN 200 million currently approved), to bring additional liquidity support. FULL LIST OF RATING ACTIONS Grupo Posadas, S.A.B. de C.V. Fitch has assigned the following rating: --USD350 million proposed senior notes at 'B+/RR3(EXP)'. Contact: Primary Analyst Miguel Guzman-Betancourt Associate Director +52 81 8399 9100 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes No. 2612, 8th floor. Monterrey, Mexico 64920 Secondary Analyst Sergio Rodriguez Senior Director +52 81 8399 9100 Committee Chairperson Alberto Moreno Senior Director +52-81-8399-9100 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: Date of Relevant Rating Committee: June 16, 2015 Additional information is available on Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 28 May 2014) here Country-Specific Treatment of Recovery Ratings (pub. 28 Jun 2013) here Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers (pub. 12 Jun 2015) here Additional Disclosures <a href=" cfm?pr_id=986622">Dodd-Frank Rating Information Disclosure Form Solicitation Status here <a href=" =2&detail=31">Endorsement Policy ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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