Fitch Affirms GRUPO SURA's IDR at 'BBB-'; Rates Local Unsecured Bonds
'AAA(Col)'; Outlook Stable
NEW YORK -- March 26, 2014
Fitch Ratings has affirmed the Issuer Default Rating (IDR) and outstanding
debt ratings of Grupo de Inversiones Suramericana S.A. (GRUPO SURA) and its
special-purpose vehicle Gruposura Finance as follows:
--Foreign currency IDR at 'BBB-';
--Local currency IDR at 'BBB-';
--COP250,000 million local unsecured bonds due 2019-2049 at 'AAA(Col)'.
--USD300 million senior unsecured bonds due 2021 at 'BBB-'.
Fitch has simultaneously withdrawn Gruposura Finance's foreign and local
currency long-term IDRs. The IDRs of Gruposura Finance are being withdrawn
because the entity is a special vehicle purpose (SPV) and the credit quality
of the bonds issued by it reflects the guarantees provided by Grupo SURA.
In addition, Fitch has also assigned 'AAA(col)' and 'F1+(col)' ratings to the
local bond and commercial paper program, respectively, for a total combined
amount of COP1.3 billion.
The Rating Outlook is Stable.
GRUPO SURA's ratings reflect the company's average credit quality of its
dividend income streams, diversification in the sources of dividends, and
track record of stability of dividends. The ratings also reflect Grupo SURA's
level of cash interest coverage and liquidity. Further factored in the
company's ratings are its historical low leverage ratios, a growth strategy
that includes acquisitions activity, as well as GRUPO SURA's track record of
funding its inorganic growth with adequate combinations of equity and debt.
The credit ratings of GRUPO SURA also incorporate the structural subordination
of the holding company's debt to the debt at its operating companies.
The Stable Outlook reflects the view that GRUPO SURA will maintain adequate
liquidity levels and a moderately leveraged capital structure stable in the
next few years.
KEY RATING DRIVERS
Stable Dividend Flow Driven by Financial Services Segment
The rating considers the diversification and quality of Grupo Sura's dividends
flow. During 2013, in line with Fitch expectations, the company received
USD284.5 million dividends, representing an increase of 24% over received
dividends in prior year. Between years 2008 to 2013, the total annual amount
of received dividend increased to a compound annual growth rate (CARG) of 20%.
The financial segment continues to be the main source of cash dividends in
2013 and represented 67% of the company's total received dividends. Grupo
SURA's received dividends from Bancolombia, Sura Asset Management (SUAM) -
including Proteccion, and Suramericana represented 31%, 21%, and 15%,
respectively over its 2013 total received dividends.
In the industrial segment, received dividends from Grupo Nutresa and Grupo
Argos represented 11% and 10% over the period. The financial services segment
is expected to continue representing the bulk of the dividend flow during the
next years, representing around 75% of Grupo SURA's total annual received
dividends. For 2014, Grupo Sura expects to receive dividends of approximately
Strong Credit Profile of Main Investments
Grupo Sura's ratings are supported by the strong credit profile of its main
dividend generators. Bancolombia (rated 'BBB'; Outlook stable by Fitch) has
operations in seven countries in Latin America and is the leader bank in
Colombia and El Salvador with a market share of 23% and 30% of loans
respectively. SUAM's sound business profile, stable cash flow generation, and
solid business position as the largest pension fund manager in Latin America
with presence in six countries are positively incorporated. Operations in
Chile, Mexico, and Peru represent 40%, 34% and 21% of SUAM's 2013 EBITDA of
USD482 million. Suramericana's solid financial strength of insurance
operations also supports Grupo SURA's income stream quality.
Confortable Debt Service Coverage
Grupo Sura's dividend stream has shown low volatility in recent years
accompanied by a sound financial policy which allows the company to adequately
cover its debt service and dividends payments. Most of Grupo Sura's major
dividends generators are companies with manageable dividends pay-out ratios
that Fitch considers are likely to remain stable in the following years. For
2013, GRUPO SURA's net operational inflow was USD380 million - including
USD285 million in received dividends and USD93 million from assets sold - to
cover USD103 million in debt services (interest and principal payments) and
paid dividends of USD134 million. The ratings factor the expectation that
Grupo Sura's dividend inflow will adequately cover its debt service with
coverage rations between 1x to 3x during the next few years, limiting the need
to rely on assets sale.
Manageable Increase in Financial Leverage
The company ended 2013 with a cash position and total adjusted debt of USD122
million and USD582 million, respectively. Grupo Sura's 2013 received dividends
totaled USD285 million. The company's net financial leverage, measured by the
ratio of total net debt to dividends received was 1.8x as of Dec. 31, 2013.
Leverage was 2.3x as of Dec. 31, 2012.
GRUPO SURA's net financial leverage is expected to reach a moderate increase
during 2014 considering the incremental debt the company is taking to fund its
participation in Bancolombia's equity increase -- already executed during the
first quarter of 2014. Grupo Sura's net debt and net financial leverage are
expected at levels around USD730 million and 3x by the end of 2014. The
ratings also incorporate in a gradual business deleverage taking place during
the following years. Grupo SURA's average net financial leverage during the
2014 -2016 period is forecasted around 2.5x.
The company has managed historically low levels of cash relative to its
short-term debt. This situation is compensated by Grupo Sura's ability to
access alternative sources of liquidity. As of December 2013, Grupo Sura's
combined cash in hand was approximately USD120 million with a short-term debt
of USD163 million. The company is planning to refinance its short term debt
during the second half of 2014. Excluding short-term debt the next sizable
debt payment amortization the company faces could be around 2017 for
approximately USD156 million, according to the final conditions of debt
issuance. Fitch views the company's refinancing risk as low with a manageable
debt payment schedule.
Positively incorporated is the company proven access to international and
local bond and equity markets, uncommitted credit lines of approximately
USD1.2 billion and a good level of non-strategic assets, which comprise
minority stakes of Grupo Sura's investment portfolio, with an estimated value
of USD1.8 billion versus proforma gross debt - post issuance - of USD800
million. In Fitch's view, under a stress scenario, Grupo Sura is likely to
generate liquidity by accessing the credit markets, executing joint ventures
with strategic partners, and disposing of non-strategic assets.
The Stable Outlook for Grupo SURA's ratings incorporate the view that the
company's net financial leverage will remain around 3x and 2.5x during 2014
and 2014 - 2016 period, respectively.
Positive Rating Actions: Future developments that may, individually or
collectively, lead to a positive rating action include:
--The positive development, above expectations already incorporated, of the
regional macroeconomic environment in which the company operates;
--An upgrade of Bancolombia's IDRs; and,
--Fitch's positive review of SUAM's credit quality due to financial
performance and balance sheet strength reaching levels above expectations.
Negative Rating Actions: Future developments that may, individually or
collectively, lead to a negative rating action include:
--Adverse macroeconomic trends leading to weaker credit metrics;
--A downgrade of Bancolombia's IDRs;
--Deterioration in SUAM's credit profile.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013).
Applicable Criteria and Related Research:
Corporate Rating Methodology -- Effective 12 August 2011 to 8 August 2012
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