Fitch Downgrades URBI's IDR to 'CCC'

  Fitch Downgrades URBI's IDR to 'CCC'

Business Wire

NEW YORK -- March 1, 2013

Fitch Ratings has downgraded the following ratings for Urbi Desarrollos
Urbanos, S.A.B. de C.V. (Urbi):

--Foreign currency Issuer Default Rating (IDR) to 'CCC' from 'B';
--Local currency IDR to 'CCC' from 'B';
--National long-term rating to 'CCC(Mex)' from 'BBB-(Mex)';
--US$150 million senior notes due 2016 to 'CCC/RR4' from 'B/RR4';
--US$300 million senior notes due 2020 to 'CCC/RR4' from 'B/RR4';
--US$500 million senior notes due 2022 to 'CCC/RR4' from 'B/RR4';
--MXN600 million in Certificados Bursatiles (CBs) due in 2014 to 'CCC(mex)'
from 'BBB-(mex)';
--National short-term ratings to 'C(mex)' from 'F3(mex)'.

KEY RATING DRIVERS

The rating downgrades reflect a substantial deterioration of Urbi's liquidity
during 2012, which has heightened the risk of default. Urbi had a negative
free cash flow (FCF) of MXN7.8 billion during 2012 primarily as a result of
increasing working capital requirements that resulted from growing inventory
levels and accounts receivables. Fitch's FCF calculation considers cash from
operations less capital expenditures and dividends.

As of Dec. 31, 2012, Urbi had MXN2.1 billion of cash and marketable
securities. This figure is a sharp deterioration from MXN5.5 billion as of
Dec. 31, 2011. The company has covered its cash drain with incremental debt
increases. Over the 12-month period ending Dec. 31, 2012, gross debt climbed
to MXN19.9 billion from MXN14.9 billion. The company's gross leverage (total
debt over LTM EBITDA) at year-end was 5.4x, with net leverage of 4.9x. Without
external funding, the company's cash position will not support another quarter
of high cash burn similar to what it experienced in the fourth quarter of
2012.

RATING SENSITIVITY

Fitch believes the factors that have contributed to cash flow deterioration in
the past--a challenging regulatory environment and changing demand
characteristics for the industry--are unlikely to change in the near term, and
may even escalate.

A significant reduction in inventories and receivables could stabilize the
company's financial situation. Another factor that could contribute to a
positive rating action would be the occurrence of a scenario in which the
company receives extraordinary financial support from the controlling
shareholders or third parties, including but not limited to the Mexican
government. While quite uncertain where this support could come from,
extraordinary financial support could provide additional time for the company
to right size its business and to liquidate assets to generate cash, to the
extent feasible.

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. 8, 2012;
--'2013 Outlook: Mexican Homebuilders', Dec.19, 2012;
--'Fitch Places Mexican Homebuilders on Rating Watch Negative', Feb. 22, 2012.

Applicable Criteria and Related Research
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
2013 Outlook: Mexican Homebuilders
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696675

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Contact:

Fitch Ratings
Primary Analyst:
Jose Vertiz, +1-212-908-0641
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Indalecio Riojas, +52 81 8399 9100
Associate Director
or
Committee Chairperson:
Daniel Kastholm, CFA, +1-312-368-2070
Managing Director
or
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Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com
 
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