Fitch Ratings Upgrs Credit Rtgs Of Mexican Bottler Bepensa To 'BBB-'.

Business Editors

CHICAGO--(BUSINESS WIRE)--June 4, 2002

Fitch Ratings has upgraded the foreign and local currency rating of Bepensa S.A. de C.V. (Bepensa) to 'BBB-' from 'BB+'. In conjunction with this rating action, Fitch has changed the Rating Outlook to Stable from Positive.

The upgrade is the result of the continued strong improvement in Bepensa's business position and financial profile. These factors are balanced against the currency mismatch between the company's debt obligations and its revenue streams, the historical volatility of the Mexican economy, and the uncertainty surrounding a potential consolidation of Coca-Cola's 15 bottlers in Mexico.

During 2001, Bepensa had an estimated carbonated soft drink market share of approximately 80%. The company's chief competitor is Pepsi-Gemex, S.A. de C.V. (Gemex or Pepsi-Gemex), PepsiCo's largest bottler in Mexico. Bepensa has been competing directly against Gemex since 1993. While Pepsi-Gemex has changed the dynamics of the market by facilitating the evolution of packaging from returnable glass bottles to one-way PET containers, it has not dented Bepensa's market position during the past decade. During 2001, Gemex's estimated soft drink market share was approximately 20% in the territories in which it competes with Bepensa.

Bepensa's dominant position vis-a-vis Gemex is due in part to the strong brand image of Coca-Cola in Mexico. Bepensa has built upon this competitive advantage during the past 50 years by developing an unparalleled beverage distribution system in the region. The company has modern facilities and production equipment, and continues to invest into its business to maintain its competitive edge. To further enhance its profitability, the company has integrated into the production of beverage coolers, truck bodies, plastic enclosures and bottles, which are used internally, and also sold to other Coca-Cola bottlers in Mexico.

In the near future, it is expected that the Pepsi Bottling Group (PBG) will acquire a controlling stake in Gemex from PepsiCo and Mr. Enrique Molina. While PBG enjoys an outstanding reputation in the soft drink industry, its ownership of Gemex should not dramatically alter the competitive landscape in the Yucatan Peninsula. PBG is expected to focus its energy and resources on large markets such as Mexico City and Monterrey, in which a percentage change in market shares means substantial additional sales volumes. The Yucatan Peninsula would not appear to be an attractive market for PBG to aggressively pursue because of the wide market share gap between Pepsi and Coke, which puts Pepsi-Gemex at a significant per unit case production and distribution cost disadvantage, and the relatively small upside of that market in comparison those in more populated areas.

Unlike most Coca-Cola bottlers in Latin America, Bepensa has aggressively built a non Coca-Cola beverage business to augment its Coke sales. Since 1995, Bepensa's sales of purified water have grown from 12.2 million five-gallon jugs to 46.7 million five-gallon jugs. As a result of its efforts to diversify its sales mix, during 2001, approximately 33% of the company's revenues were generated from the sale of purified water, and proprietary carbonated and non-carbonated soft drinks. These sales are very profitable for the company because the company does not pay Coke a concentrate fee for these products.

Bepensa ended 2001 with $137 million of cash and marketable securities and $174 million of total debt. These figures were higher than normal for the company due to a $75 million syndicated loan it received on Dec. 24, 2001. Bepensa used proceeds from this loan on Jan. 22, 2002, plus cash from operations, to prepay the $85 million balance of its senior notes due in 2004. As a result, the company's debt totaled $83 million as of March 31, 2002 and its cash and marketable securities balance was $58 million.

During 2001, Bepensa generated $106 million of EBITDA on $450 million of sales. The company's interest coverage ratio, as measured by EBITDA-to-interest expense, was 8.4 times (x). During 2002, the company's EBITDA should increase to approximately $110 million, as it continues to build its water business. Consequently, the company's interest coverage ratio should be more than 11.0x and its leverage ratio, as measured by total debt-to-EBITDA, should be approximately 0.7x. Liquidity should not be a concern for the company in the near future, as its syndicated loan matures in semi-annual payments of $10.7 million beginning on Dec. 24, 2003. While these credit protection measures are strong for the rating category, the rating takes into account some uncertainty surrounding the potential consolidation of the Mexican soft drink industry and incorporates a cushion against a material devaluation of the peso versus the dollar.

It is important to note that The Coca-Cola Company does not own an equity stake in Bepensa, as it does in Panamco, Embotelladora Andina and Coca-Cola Embonor. As a result, implicit support by Coca-Cola is not factored into Bepensa's credit rating by Fitch, as it is for those of Panamco, Embotelladora Andina and Coca-Cola Embonor.

Bepensa is the exclusive bottler for The Coca-Cola Company (Coca-Cola) in the Mexican states of Campeche, Yucatan and Quintana Roo, collectively referred to as the Yucatan Peninsula. Bepensa complements the sales of Coca-Cola products with sales of its proprietary soft drink products, Bevi and Friolin. In addition to bottling soft drinks, Bepensa also bottles and sells purified water in the states of Campeche, Yucatan, Quintana Roo, Tabasco, and Veracruz. Bepensa's purified water product, Cristal, is also a proprietary brand.