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Fitch Places Cencosud on Rtg Watch Negative on Announcement of Colombian Operations Acquisition



  Fitch Places Cencosud on Rtg Watch Negative on Announcement of Colombian
  Operations Acquisition

Business Wire

NEW YORK -- October 19, 2012

Fitch Ratings has placed the following ratings of Cencosud S.A. (Cencosud) on
Rating Watch Negative:

--Long-Term Issuer Default Rating (IDR) 'BBB-', RWN;

--Local Currency IDR 'BBB-', RWN;

--USD750 million unsecured notes due in 2021 rating 'BBB-', RWN.

The Rating Watch negative follows Cencosud's announcement that it has agreed
to buy Carrefour SA's Colombian unit for approximately USD2.5 billion. This
acquisition will pressure the company's liquidity position and financial
flexibility, as the transaction is being funded entirely with short-term debt.

The company is expected to raise equity to fund a portion of the acquisition.
The equity raised will have to be substantial to avoid a downgrade. If the
equity raised is not substantial then a downgrade could occur. The new equity
will be in addition to the capital increase during the third quarter of 2012
of USD1.2 billion. The transfer of assets being acquired is expected to close
before Dec. 31, 2012.

This capital increase is expected to take place alongside an international
debt offering. The targeted outcome of these measures is to bolster Cencosud's
capital structure and improve its debt repayment schedule. Fitch estimates
Cencosud's pro forma total adjusted debt-to-EBITDAR ratio to increase to
around 5.5x following completion of the acquisition. The company's
consolidated total adjusted debt-to-EBITDAR ratio at the end of June 2012 was
4.8x. Should this ratio remain above 3.5x following the expected capital
increase, a rating downgrade is likely to occur.

The company's liquidity position will be weak post-acquisition. Considering
the USD2.5 billion of short-term funding, Cencosud's short-term pro forma debt
is estimated to be around USD3 billion, representing approximately 45% of its
total on-balance-debt post acquisition, with a low cash position.

The acquisition will increase Cencosud's regional presence in the Latin
America retail industry by accessing the growing Colombia market, and broaden
its geographic diversification in the region. The operations being acquired
(Carrefour's Colombian unit) includes 72 hypermarkets, 16 convenience stores
and four cash-and-carry stores.

Fitch views the acquisition as strategically positive over the medium term.
The growth of the Colombian operations is expected to reduce Cencosud's
exposure to Argentina, a country with high sovereign risk. The company's
operations in Argentina currently account for approximately 28% of its total
revenues.

With this acquisition Cencosud will not only become the second largest
supermarket operator, with an estimated market share of around 14%, and a main
player in home-improvement stores in Colombia, but it will also give Cencosud
strategic access to an important land bank. This was one of the main barriers
to expanding its operations in Colombia.

Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'National Ratings Criteria' (Jan. 19, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

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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.

Contact:

Fitch Ratings
Primary Analyst
Jose Vertiz, +1 212-908-0641
Director
Fitch, Inc.
One State Street Plaza,
New York, NY 10004
or
Secondary Analyst
Andrea Jimenez, +562-499-3322
Associate Director
or
Committee Chairperson
Joe Bormann, +1 312-368-3349
Managing Director
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com
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