Fitch Rates BR MALLS Participacoes S.A.'s Proposed Debentures 'AA(bra)'
NEW YORK -- March 22, 2013
Fitch Ratings has assigned an 'AA(bra)' rating to BRMALLS' proposed debentures
in the expected amount of BRL400 million. Proceeds from the issuance would be
used to fund the company's capex plan, refinance existing debt, and for
general corporate purposes.
Fitch currently rates BRMALLS as follows:
BR Malls Participacoes S.A. (BRMALLS)
--Foreign currency Issuer Default Rating (IDR) 'BB+'';
--Local currency IDR 'BB+;
--Long-term national scale rating 'AA(bra)';
--BRL320 million local debentures, first and second tranches due in 2014 and
2016, respectively, 'AA(bra)';
--BRL400 million local debentures, first and second tranches due in 2017 and
2019, respectively, 'AA(bra)'.
BR Malls International Finance Limited (Finco):
--Foreign currency IDR 'BB+';
--USD175 million Perpetual Notes 'BB+';
--USD230 million Perpetual Notes 'BB+'.
The Rating Outlook is Stable.
The ratings reflect BRMALLS' business position as the largest shopping center
operator in Brazil with 51 malls throughout the country, an increase from 34
during 2008. The revenue stream from these malls has resulted in stable and
predictable cash flows. The company's consistent use of a balance of equity
and debt to fund its organic and inorganic growth during the past five years
has kept leverage levels low relative to the value of its assets.
The Stable Rating Outlook reflects the expectation that BRMALLS will continue
to deliver positive operating results based upon its strong market position
and the high quality of its assets. Leverage is not expected to increase from
current levels, as additional growth is expected to occur through a continued
balanced mix of funding that will not compromise its capital structure.
KEY RATING DRIVERS
Growing Revenues and EBITDA Driven by Investments:
During 2012, BRMALLS revenues were BRL1.1 billion, an increase from BRL861
million and BRL546 million during 2011 and 2010. BRMALLS' EBITDA for 2012 was
BRL910 million, which compares positively with its EBITDA levels of BRL685
million in 2011 and BRL442 million and 2010. This growth has been driven by
investments of BRL1.1 billion during the LTM, BRL2.4 billion during 2011 and
BRL2.2 billion during 2010. Equity funding consisted of a BRL446 million
offering in 2009 and a BRL731 million secondary issuance during 2011.
Lease Characteristics Support Revenue Stream:
BRMALLS rents and net operating income per square meter are stable to
positive. They are supported by a lease structure that consist of fixed rent
payments (70%) and tenant reimbursements (10%), which cover costs associated
with property management and taxes. The lease portfolio has staggered lease
expiration dates. About 75% of BRMALLS rental income contracts having
expiration dates beginning in 2015 and beyond.
Diversified Business Lowers Risks:
BRMALLS' increased geographic, income and tenant diversification make it less
prone to fluctuations in the domestic economy. The company has operations in
all five regions of Brazil; the largest mall represents approximately 13% of
its total revenue. The company's diversification spreads over to its customer
base as it looks to serve all income segments. Only about 10% of the company's
total annual revenues from rent and services are derived from anchor stores.
None of those stores is individually responsible for more than 2% of the
company's annual revenues from rent and services.
No Major Changes Expected in Leverage:
The gross leverage of BRMALLS is expected to remain around 5x in the medium
term, which compares well with regional and global players in the industry. As
of Dec. 31, 2012, the company's total debt was BRL5 billion. The company's
gross and net leverage ratios were 5.5x and 4.7x as of Dec. 31, 2012. Fitch
base case projects 2013 revenues at approximately BRL1.3 billion and an EBITDA
margin of 80%. The company's investments are expected to be around BRL1.2
billion, which should result in gross leverage stable around 5x.
BRMALLS maintains adequate liquidity. As of Dec.31, 2012, the company faces
debt amortizations of BRL947 million during 2013, and has a cash position of
BRL791 million. BRLMALLS short-term debt obligations are expected to be
reduced through the proposed transaction. BRMALLS has a high level of
unencumbered assets; approximately 51% of the company's owned GLA (429
thousand m2) is free of any liens. The company could use these assets in the
future to access liquidity. The high level of unencumbered assets also
presents a good recovery prospect for the unsecured debt in a default
scenario, with LTV levels in the range of 30% to 50%.
Fitch expects BRMALLS to maintain adequate leverage and liquidity levels.
Fitch would consider a negative rating action if the company's financial
profile deteriorates due to some combination of the following factors:
aggressive capex; adverse macroeconomic trends leading to weaker credit
metrics; significant dividend distributions; and higher vacancy rates or
deteriorating lease conditions. A stronger capital structure could lead to an
increase in the company's ratings.
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);
--'National Ratings - Methodology Update' (Jan. 19, 2011).
Applicable Criteria and Related Research
Corporate Rating Methodology
National Ratings Criteria
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Jose Vertiz, +1-212-908-0641
Fitch Ratings, Inc.
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New York, NY 10004
Jose Romero, +11-55-11-4504 2600
Joe Bormann, +1-312-368-3349
Managing Director, Latin America Corporates
Brian Bertsch, +1-212-908-0549
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