Camposol S.A.#s $300 Million Senior Unsecured Notes Rated #B+#; Corporate Credit And Issue Ratings Affirmed At #B+#

Stocks and Financial Services Press Releases Wednesday February 7, 2018 09:27
MEXICO CITY--7 Feb--S&P Global Ratings

MEXICO CITY (S&P Global Ratings) Feb. 6, 2018--S&P Global Ratings assigned its 'B+' issue-level rating on Camposol S.A.'s proposed long-term senior unsecured notes for $300 million. We also affirmed our 'B+' global scale corporate credit rating on Camposol. In addition, we affirmed our 'B+' issue-level rating on the company's $147.5 million senior secured notes due 2021. The outlook remains stable.

On Jan. 30, 2018, Camposol announced a tender offer to purchase for cash its 10.5% senior secured notes due 2021. Camposol plans to issue senior unsecured notes for $300 million to repay the tendered notes, several bank loans for $16 million, and use the remaining $123 million from the proceeds to finance its growth strategy and for other corporate purposes.

The rating on the notes is at the same level as the corporate credit rating, because more than 99% of Camposol's debt will be composed of the proposed notes on a pro forma basis. The rating also reflects that the Camposol Holding Ltd, Marinazul S.A., and Campoinca S.A. subsidiaries will irrevocably and unconditionally guarantee the notes on a senior unsecured basis. We expect the proposed transaction to enhance Camposol's capital structure, improving its maturity profile and interest burden.

The ratings on Camposol reflect its limited scale of operations compared with those of its global rated peers, limited product diversification, the discretionary nature of its products, and asset concentration in Peru. However, we continue to expect that Camposol will post EBITDA margins above the average for the global agribusiness sector in the next 12 months. Moreover, we expect debt-to-EBITDA and EBITDA interest coverage ratios to remain in line with our current financial risk profile assessment in the next 12 months. Through the remaining proceeds of the proposed issuance coupled with expected cash flow generation, Camposol plans to increase its annual capital expenditures (capex) up to $120 million annually to continue expanding its operations. We continue to incorporate a high volatility for earnings and cash flows for the company stemming from the cyclical nature of the business, the significant price fluctuations of Camposol's products, and its exposure to external factors, including potentially adverse weather conditions.

For further information on Camposol's corporate credit rating, please refer to "Camposol S.A. Ratings Raised To 'B+' From 'B-' On Improved Operating And Financial Performance; Outlook Stable", published Jan. 18, 2018.

The stable outlook reflects our expectation that Camposol will maintain a solid operating and financial performance in the next 12 months, reflected in EBITDA margins close to 30%, a debt-to-EBITDA ratio around 3.0x, and EBITDA interest coverage above 5.0x, even considering the additional debt from the proposed bond issuance.

We could downgrade Camposol in the next 12 months if its operating and financial performance weakens from our current expectations, reflecting adverse weather conditions that significantly reduce harvest yields or an unanticipated aggressive investment strategy, resulting in debt to EBITDA above 4.0x on a consistent basis. A deteriorating liquidity position could also trigger a negative rating action.

A positive rating action in the next 12-18 months could occur if the company further diversifies its asset footprint, posts better-than-expected revenue and margins, and has stronger cash flow generation and credit metrics--reflected in debt to EBITDA consistently below 2.0x and consistently positive discretionary cash flow generation.

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