Fitch Publishes 'BB' Rating on Masisa's USD300MM Notes
CHICAGO -- April 29, 2014
Fitch Ratings publishes a rating of 'BB' for the USD300 million senior
unsecured 9.5% notes due 2019 issued by Masisa S.A. (Masisa). The notes are
unconditionally guaranteed by Forestal Tornagaleones and Masisa Forestal.
Proceeds from the notes will primarily be used to refinance Masisa's medium-
and short-term debt.
KEY RATING DRIVERS
HIGH EXPOSURE TO ARGENTINA AND VENEZUELA
Masisa's ratings are constrained by the company's large exposure to Venezuela
and Argentina. Combined these markets represented 55% of Masisa's consolidated
EBITDA as of Dec. 31, 2013. Challenges in these markets include non-stable
currencies, political interference as well as foreign currency transfer
restrictions. Masisa's net leverage of 3.0x as of Dec. 31, 2013 is below the
3.4x the company averaged during the past five years. Excluding the EBITDA
from these markets, the company's net leverage ratio is around 6.8x.
SOUND BUSINESS POSITION
The ratings of Masisa incorporate its sound business position within Latin
America as a leading producer of wood boards with 3.4 million cubic meters of
installed capacity. The company's operations are concentrated in Chile,
Brazil, Argentina, Venezuela, and Mexico. Masisa has Placentro retail stores
and commercial offices in Peru, Colombia and Ecuador, and exports to countries
outside the region such as the U.S. An additional credit consideration is the
company's continued uses of equity to partially fund growth. Increases of
equity occurred in 2003, 2005, 2009 and 2013.
FORESTRY ASSETS ARE IMPORTANT CREDIT CONSIDERATION
The ratings further incorporate Masisa's ownership of 226,433 hectares of
plantations in South America, which along with its forestry land, had an
accounting value of USD912 million as of Dec. 31, 2013. During March 2014, the
company reached an agreement to sell 32,500 hectares of plantations in Chile
to Hancock Natural Resource Group ('Hancock') for USD204 million. To implement
the transaction, Masisa will provide these forestry assets to a New Co., based
in Chile and Hancock will subscribe to 80% of the New Co's. shares, with
Masisa holding the remaining 20%. Masisa and Hancock will subsequently enter a
long term fiber supply agreement, which gives Masisa the option to purchase
wood fiber. During 2013 Masisa supplied 3% of its Chilean industrial fiber
needs from these forests. This sale (on a pro forma basis) reduces the
company's 2013 net leverage ratios to 2.2x and 4.9x (excluding Venezuela and
EBITDA GROWTH DURING 2013, DESPITE DEVALUATION IN VENEZUELA
Masisa generated an EBITDA of USD241 million during 2013, an increase from
USD224 million during 2012 mainly driven by improved performance in Brazil,
Chile and Mexico. The company's performance in Argentina has remained weak to
relative potential, while its EBITDA in Venezuela increased to USD76 million
from USD70 million during 2012, despite the company`s decision to present its
2013 financial statements with the 160% devaluation of the bolivar against the
dollar during January 2014. Masisa's Brazilian operations benefited from lower
energy costs, which offset a 2.7% volume decrease due to a fire at the
Montenegro MDP plant during September 2012. Its Chilean operations benefited
from a turnaround in the U.S. housing market, which increased demand for MDF
moldings (+76%). During 2013 Masisa repatriated USD38 million of dividends
from its Argentinean subsidiary.
MODEST INCREASE IN NET DEBT
Masisa had USD866 million of consolidated debt and USD137 million of cash and
marketable securities as of Dec. 31, 2013, resulting in USD729 million of net
debt. This figure compares with USD724 million as of Dec. 31, 2012. As of Dec.
31, 2013, USD643 million, or 74% of Masisa's consolidated debt is long term.
This debt consists of USD373 million of bonds, USD262 million of bank debt and
USD1.5 million of financing leases. About USD50 million of the company's cash
is trapped in Venezuela, which increases its affective net leverage to USD780
million prior to the receipt of USD204 million from the forestry asset sale to
MANAGEABLE LIQUIDITY PROFILE
During December 2013 Masisa refinanced part of its debt with a USD150 million
18-months bridge loan. This bridge is expected to be taken out with some of
the proceeds of the USD300 million international 9.5% senior unsecured notes.
The sale of non-strategic forestry assets should further bolster the company's
liquidity. Masisa's Board of Directors approved a USD100 million capital
increase, of which Masisa placed USD80 million during the pre-emptive right
period. As of Dec. 31, 2013, Masisa had USD222 million of short-term debt.
SIGNIFICANT CAPEX PROGRAM
Masisa's capex program has been oriented toward strengthening its Mexican
operations due to the strong growth potential of the market, as per-capita
consumption of boards is low and the housing deficit is high. Between 2013 and
2015, Masisa plans to invest USD600 million. Key investments include the
acquisition of Rexcel and Arclin's assets (concluded), which increased coating
capacity in Chile and Brazil, and constructing a new MDF plant in Mexico with
200,000 cubic meter annual capacity. This mill includes a 100,000 cubic meter
melamine facility. Financing for these investments should be through the
USD100 million capital increase, USD300 million of cash flow from operations
(Ex-Venezuela), and USD204 million of proceeds from the divestiture of
non-strategic forestry assets.
Negative rating actions could occur if there is a sustained net debt increase,
operating cash flow weakens, or the political environment in Argentina or
Venezuela deteriorates further. Absent significant debt reduction, positive
rating actions are not likely in the short term due to Masisa's reliance upon
Venezuela and Argentina for around 50% of its EBITDA.
Fitch currently rates Masisa as follows:
--Foreign and local currency Issuer Default Ratings 'BB';
--National scale rating of Bond Line No. 355, No. 356, No. 439, No. 440, No.
560, No. 724 and No. 725 'A-(cl)';
--Short-term rating 'F1(cl)';
--Long-term national scale rating 'A- (cl)'.
--Equity rating 'Primera Clase Nivel 3(cl)'
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (July 8, 2013)'.
Applicable Criteria and Related Research:
Corporate Rating Methodology: Including Short-Term Ratings and Parent and
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Jay Djemal, +1-312-368-3349
Fitch Ratings, Inc.
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