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Fitch Rates WPE International Coorperatief's Proposed Guaranteed Notes 'B+(exp)/RR4'.

BUENOS AIRES, Argentina -- Fitch Ratings has assigned 'B+' local and foreign currency Issuer Default Ratings (IDRs) to WPE International Coorperatief U.A. (WPE International), a direct subsidiary of WPE, which in turn is wholly owned by Industrias Metalurgicas Pescarmona (IMPSA). Fitch has also assigned 'B+(exp)/RR4' ratings to WPE International's proposed guaranteed notes of up to US$300 million due in 2017/2020. These notes will be irrevocably and unconditionally guaranteed by IMPSA and WPE on a senior unsecured basis.

The Rating Outlook is Stable.

The rating of the proposed notes reflects the creditworthiness of the guarantors. Fitch rates IMPSA 'B+'. WPE is a fully owned subsidiary of IMPSA with strong operating, strategic and financial ties to its parent company.

IMPSA's 'B+' ratings reflect the positive trend for the company's long-term business fundamentals due to sustained global demand for hydro and wind power generating equipment. They also incorporate the company's growing business presence in Brazil and its sizeable backlog, which provides certainty to the company's cash generation over the medium term. Balanced against these strengths are the company's high leverage, aggressive capital expenditure program (mostly concentrated in the development of wind farms, funded with non-recourse debt) and its dependence on a few large projects in developing countries. A sudden downturn in the key markets would negatively impact IMPSA's ability to develop new projects.

Fitch expects revenues and EBITDA from Brazil to represent more than 65% of IMPSA's consolidated figures from FY 2011 onwards. The growth of the company's business in Brazil has reduced IMPSA's exposure to more volatile markets such as Argentina and has increased its access to multiple funding sources. This has reduced concerns about IMPSA's need to finance its working capital needs in Argentina should that market deteriorate, and has enabled the company's foreign currency rating to exceed the 'B' country ceiling of Argentina.

Fitch expects IMPSA's EBITDA to grow to above US$160 million during the fiscal year ended Jan. 31, 2011. The company's free cash flow (FCF) is anticipated to remain negative during 2010 due to capital expenditures and growing working capital needs. Much of the cash deficit will be funded with non-recourse project financing. For the fiscal year ended in January 2011, Fitch expects IMPSA's total debt with recourse to increase to approximately US$450 million from $438 million, resulting in a total debt (with recourse)-to-EBITDA ratio of approximately 3 times (x). This ratio is an improvement from 4.3x for the fiscal year ended January 2010.

For the fiscal year ended Jan. 31, 2010, U.S. dollar denominated sales accounted for approximately 90% of IMPSA's revenues. At July 2010, IMPSA's backlog was US$3.65 billion, compared to US$1.5 billion at May 2009. Given the long-term production cycle of IMPSA's developments, usually in the range of 30 months, this backlog level provides some certainty to the company's cash generation in the medium term.

The creation of WPE International is part of IMPSA's liability management program. This program aims to extend the average life of the company's debt, which includes the buy-back of its 2014 notes through a tender offer announced on Sept. 8, 2010 and the issuance of new notes. Both transactions are contingent upon one another. Therefore, the issuance of the proposed notes will depend on the success of the tender offer. Use of proceeds include the refinancing of IMPSA's 2014 notes (rated 'B+/RR4' by Fitch), the prepayment of short-term loans and funds for additional CAPEX. Through this transaction, the average life of IMPSA's consolidated debt is expected to grow to above four years from approximately two years as of today.

The company's ratings could come under pressure if non-recourse financing increases above levels anticipated by Fitch, any material performance problems that threaten future projects and cash flow, or a failure to comply with the terms for the operation of the wind farms (for which long-term PPAs have been signed with Eletrobras and the CCEE).

Additional information is available 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' dated Aug. 13, 2010;

--'Liquidity Considerations for Corporate Issuers' dated June 12, 2007;

--'Parent and Subsidiary Rating Linkage' dated July 14, 2010;

--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers' dated Nov. 24, 2009.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Parent and Subsidiary Rating Linkage Criteria Report

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=534826

Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489006

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
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Publication:Business Wire
Geographic Code:3ARGE
Date:Sep 13, 2010
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