Fitch Rates Posadas' USD50MM Senior Notes Reopening 'B+/RR3'

lunes 16 de mayo de 2016 14:34 GYT
 

(The following statement was released by the rating agency) MONTERREY, May 16 (Fitch) Fitch Ratings rates Grupo Posadas, S.A.B. de C.V.'s (Posadas) reopening of senior notes due in 2022 for up to USD50 million 'B+/RR3'. Proceeds from the proposed reopening will be used to refinance the company's USD38 million of outstanding notes due in 2017. The additional USD12 million will be used for general corporate purposes. After the payment of the notes due in 2017, the total debt will be comprised of USD400 million senior notes due in 2022. The 'RR3' Recovery Rating assigned to the issuance indicates good recovery prospects given default. 'RR3' rated securities have characteristics consistent with security historically recovering 51%-70% of current principal and related interest. 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 Solid Business Position Posadas ratings are supported by the company's solid business position, strong brand name and 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 quality brand image have resulted in occupancy levels that are above the industry average in Mexico. Strengthening Operations Posadas operating performance continue to improve since the last two years. RevPAR has increased, particularly in owned and leased hotels; driven by higher ADR and to a lesser extent higher occupancy. System wide occupancy has remained stable, above 65%, 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 increased cross-selling opportunities. Capex Funded with Cash Flow Fitch expects higher capex levels reaching up to MXN1,000 million for the next few years mainly related to Club Vacacional projects in Los Cabos and Acapulco as well as the remodeling of rooms. These investments are expected to be funded with internally generated cash flow, which will result in no additional debt for the company. Going forward, Fitch believes Posadas' strategy will be centered mainly on managing hotels, as opposed to owning the properties. New openings should continue for all brands, mainly Fiesta Inn, Fiesta Americana and One, which are mostly under managed and leased formats. Correlation to Economic Cycles The ratings incorporate the industry's high correlation to economic cycles, which negatively affects operating trends in downturns and increases volatility of operating results. The use of multiple hotel formats allows the company to target domestic and international business travelers of different income levels, in addition to tourists, thus diversifying its revenue base. Geographic diversification is limited as Posadas' operations are primarily located in Mexico KEY ASSUMPTIONS Fitch's key assumptions within the rating case for Posadas 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; --Capex funded with internally generated cash flow. RATING SENSITIVITIES Negative Trigger: 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/EBITDAR consistently higher than 5.0x. Positive Trigger: 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/EBITDAR consistently below 4.5x. LIQUIDITY Liquidity is sound. Assuming the repayment of the USD38 million senior notes, the only maturity will be the senior notes due in 2022. Cash balances as of March 31, 2016 were USD92 million. The additional USD12 million will be used for general corporate purposes. As of March 31, 2016 Posadas has no committed credit facilities. Fitch rates Grupo Posadas, S.A.B. de C.V as follows: --Outstanding USD38 million senior notes due in 2017 'B+/RR3' --USD400 million senior notes due 2022 'B+/RR3' --Local and Foreign currency IDRs 'B'; Outlook Stable; --National scale rating 'BB+(mex)'; Outlook Stable; Contact: Primary Analyst Javier Rios Associate Director +52 81 8399 9144 Fitch Mexico, S.A. de C.V. Prol. Alfonso Reyes No. 2612 Piso 8, Col. Del Paseo Residencial Monterrey, NL, 64920, Mexico Secondary Analyst Diana Cantu Analyst +52 81 8399 9100 Committee Chairperson Alberto Moreno Senior Director +52 81 8399 9100 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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. 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