Masisa's Ratings Unchanged Upon Mexican PB Plant Acquisitions
August 22, 2012 | 6:14 pm CDT
Masisa's Ratings Unchanged Upon Mexican PB Plant Acquisitions

CHICAGO(BUSINESS WIRE) -- The ratings for Masisa S.A. (Masisa) remain unchanged following the company's recent announcement that it will acquire two Particle Board (PB) plants in Mexico, according to Fitch Ratings. The transaction will be financed by a USD100 million capital increase, with the standalone PB plants priced at USD54.2 million plus working capital. The acquisition is subject to the final approval of the Mexican regulatory bodies. A complete list of ratings is provided at the end of this release.

The Transaction

Masisa announced that its Mexican subsidiary, Masisa Mexico, agreed with Grupo Kuo and its subsidiaries Arrendadora Rexcel S.A. and Rexcel S.A. de C.V., to buy two PB plants with total capacity of 460,000 cubic meter and related assets in Mexico. The other assets include melamine lines, impregnation and printing lines, a 24,000 ton capacity resin plant, laminated lines, land, related brands, and all assets that Grupo Kuo operates through its affiliate, Rexcel. These assets are located in Lerma, Zitacuaro and Chihuahua, in Mexico.

The price for the acquisition is USD54.2 million plus working capital, totaling an estimated of USD 63 million. The transaction is expected to be completed by the end of this year. This acquisition will result in Masisa Mexico representing nearly 18% of Masisa's total board capacity.

Capital Increase

Masisa announced that the acquisition will be financed with a USD100 million capital increase with the controlling shareholder committing USD65 million to maintain a 65% controlling participation. The remaining part of the capital increase will be used to finance other investment projects including the acquisition of the resin producer Arclin, Mexico (announced during April 2012) plus melamine lines in Chile and Brazil at approximately USD11 million each. Masisa will call for an extraordinary shareholders meeting to approve the capital increase once the transaction is approved by the Mexican regulatory entities.

Neutral Impact to Masisa's Credit Quality

The proposed transaction does not materially impact Masisa's credit profile. For the LTM ending March 31, 2012 the company's consolidated EBITDA was USD216 million with total debt of USD899 million and cash and marketable securities of USD137 million. Credit ratios were consistent with the rating category, with a total debt/EBITDA and a net debt/EBITDA of 4.2x and 3.5x, respectively. On a pro forma basis, Masisa's total debt/EBITDA and net debt/EBITDA ratios are expected to temporarily increase to 4.4x and 3.8x, respectively, decreasing to previous levels once the capital contribution occurs, which management estimates will take not more than two months after payment.

Fitch views the proposed transaction as strategic as it improves Masisa's geographic diversification and market position in Mexico. Tangible synergies are expected to be achieved within the company's Mexican operations by the end of 2013.

Masisa's ratings could be downgraded if debt increases, operating cash flow weakens, or the political environment in Argentina or Venezuela deteriorates further. A rating upgrade could follow a period of sustained debt reduction and corresponding improvement in credit metrics.

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)';

--Equity rating 'Level 2'.

--Long term national scale rating 'A- (cl)'.

The Rating Outlook is Stable.

Additional information is available at ' '.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology…

SOURCE: Fitch Ratings

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