Fitch Ratings has affirmed
Fitch has also affirmed the National Long-Term Credit Rating at 'C(bra)', and the 2024 notes issued by
The ratings reflect InterCement's 'standstill status' while continuing to negotiate its debt-restructuring plan. The company has already announced that it has hired a financial advisor to evaluate strategic alternatives, such as private placement, merger, or partnership with a strategic player, or even a potential full divestment. At this time, Fitch has limited visibility of InterCement's future performance - given the uncertainties around the final asset-sale structure and the remaining operating cash flow basis.
Key Rating Drivers
Standstill Status: InterCement has announced two renewals of its standstill agreement with local debentures holders since 2Q23, with the current maturity at
Challenge to Complete Refinancing: InterCement has tried to find alternatives to boost its holding and Brazilian capital structures over the last few years. It raised
Shrinking Portfolio: InterCement completed three non-core asset sales in different geographies during 2023, closing the year with operations only in
Despite highly volatile macroeconomic scenarios and currency-control restrictions in
Unsustainable Capital Structure: On a proforma basis, incorporating the asset sale of
Derivation Summary
InterCement's rating reflects its standstill status, pending negotiations for a full debt restructuring with creditors.
Key Assumptions
Brazilian and Argentinian volumes to have declined marginally in 2023.
Capex levels around
Dividends to minorities and preferred shareholders of around
KEY RECOVERY RATING ASSUMPTIONS
Going-Concern (GC) Approach
The GC EBITDA estimate reflects Fitch's view of a sustainable post-reorganization EBITDA, excluding
Fitch applies a waterfall analysis to the post-default EV based on the relative claims of the debt in the capital structure. The debt waterfall assumptions consider the company's proforma total debt. These assumptions result in a recovery rate for the unsecured bonds within the 'RR2' range, but due to the soft cap of
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Proactive steps by the company to bolster its capital structure significantly, including asset sales, allowing a smooth refinancing of its capital-market debt without a material reduction in terms.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
An uncured payment default on any material financial obligation would lead to a downgrade of the IDRs to 'RD'.
The completion of a proposed exchange offer would lead to a downgrade of the Long-Term IDRs to 'RD'. The IDRs would be subsequently upgraded to a rating level reflecting the post-distressed debt exchange (DDE) credit profile.
Liquidity and Debt Structure
High Refinancing Risks: As of
Issuer Profile
InterCement is a large cement producer with 15 million tons of total consolidated cement sales during 2022 and annual production capacity of 19 million tons, considering only its currently operations in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
InterCement has an ESG Relevance Score of '4' for Governance Structure due to limited board independence through ownership by key shareholder
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores
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