Mexico, March 09, 2011 -- Moody's de Mexico has assigned a Aa3.mx national scale rating
to the proposed bond issuance of Vinte Viviendas Integrales, S.A.P.I.
de C.V. ("Vinte") ((P)Ba1 global scale,
local currency). In addition, Moody's has assigned
a Baa3.mx national scale issuer rating (B2 global scale,
local currency). This is the first time Moody's rates Vinte.
The rating outlook is stable.
The following first-time ratings were assigned:
Vinte Viviendas Integrales, S.A.P.I.
de C.V.
- (P)Ba1 / Aa3.mx to the proposed bond rating
- B2 / Baa3.mx issuer rating
RATINGS RATIONALE
Vinte proposes to issue MXN$100 million from a five-year,
MXN$1 billion MTN program. The notes will have a maturity
of three years and will carry a 50% partial credit guaranty (PCG)
from the International Finance Corporation (IFC, LT issuer rating
Aaa/Stable). The IFC will guarantee to cover six amortization payments
up to MXN$50 million pesos. Vinte and the IFC have agreed
to sign prior to the proposed bond issuance a revolving line of credit
agreement in the amount of MXN$50 million for the sole purpose
of drawing on the PCG, in the event Vinte is unable to make its
bond payments. The IFC guarantee is backed by a pool of assets
held in a trust, the value of which must be maintained at 1.3x
the PCG of MXN$50 million plus any amounts outstanding on an existing
MXN$136 million working capital line of credit that Vinte has with
the IFC. Proceeds from this issuance will be used to repay some
outstanding construction loans, pay down a portion of the outstanding
balance on the existing working capital line with the IFC and for general
corporate purposes.
The (P)Ba1 rating of the proposed issuance is, on the global scale,
four notches above Vinte's issuer rating. The proposed bond
rating reflects several factors including Vinte's underlying issuer
rating of B2/Baa3.mx, the rating of the IFC (Aaa/Stable),
the amortization schedule of the transaction, how the guarantee
is applied in the event of default and the expected recovery values of
the transaction's collateral, which correlate directly to
Vinte's issuer rating.
The B2/Baa3.mx issuer rating reflects Vinte's position as
a niche player in the Mexican homebuilding sector, focused on the
construction of sustainable urban communities in high-growth areas.
Vinte has differentiated itself by offering clients services such as technology
in the home by providing PCs with the purchase of every home as well as
complementary internet access for the first few months, several
systems to optimize monthly utility use and post-sale value-added
through the creation of community boards. The company sales mix
is mainly focused on economic/affordable entry-level product,
areas where the greatest demand lies, along with some middle and
upper-income housing. Vinte has a relatively short operating
history (founded in 2001 and started operations in 2003) and is small
in comparison to the largest public homebuilders, however the company
has an experienced management team in place that has worked together for
many years. In addition, the company has had stable earnings
growth with a solid fixed charge coverage and modest leverage ratio,
coupled with efficient controls and construction expertise. The
IFC is a major shareholder and holds the right to a seat on the company's
Board of Directors. The IFC is also an important lender for Vinte.
These positive factors are offset by the high investment costs of land
and infrastructure as well as some speculative homebuilding. The
company also has substantial geographic concentration in the State of
Mexico. Other challenges include the business's reliance
on the Mexican government's support for housing, Mexico's
economic and political environment in addition to funding concentration
for low-income housing. Mortgages are allocated almost exclusively
by INFONAVIT and FOVISSSTE, which represent approximately 45%
and 35% of Vinte's mortgaged home sales, respectively.
The stable rating outlook is based on Moody's determination that Vinte's
sound management team executes strong internal controls, construction
expertise and efficient methods. Moody's believes that Vinte has
a well thought out strategic plan and has done a good job of executing
on it since operations began with a long-term commitment from the
IFC as shareholder the right of a board member and as a lender.
The stable outlook also reflects Moody's expectation that Vinte will at
least maintain its fixed charge coverage ratio and leverage and continue
to improve efficiencies in land development. Furthermore,
Moody's also expects that Vinte will continue to focus on targeting its
current product mix, while maintaining high quality construction.
Rating improvements will be difficult in the medium-term,
but would be predicated upon Vinte increasing its size by at least 30%
based on total assets while at least maintaining its solid credit statistics.
Rating improvements also could result from bringing Total Debt/Total Assets
closer to 30%, while at a minimum having EBITDA margins in
the low to mid 20% range. Downward rating pressure would
result from substantial missteps in its growth strategy as evidenced by
consistent (more than two quarters) negative free cash flow generation.
In addition, downward rating movements will be predicated upon bringing
total debt to total asset levels closer to 50%, with EBITDA
margins sustained below 20% and fixed charge coverage falling consistently
below 2x. Increased costs of land and land development would also
result in negative rating pressure, as would an adverse shift in
Mexican governmental housing policy.
The principal methodology used in this rating was Global Homebuilding
Industry rating methodology published in March, 2009.
Vinte Viviendas Integrales, S.A.P.I.
de C.V., based in Mexico City, Mexico,
is a fully integrated, diversified homebuilder engaged in the development,
construction, marketing, consulting, and sales of economic/affordable
entry-level as well as some middle- and upper-income
housing developments in Mexico. As of September 30, 2010,
Vinte reported approximately $1.2 billion Mexican pesos
in assets and $0.5 billion Mexican pesos in shareholders'
equity.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Griselda Bisono
Analyst
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Philip Kibel
Senior Vice President
Commercial Real Estate Finance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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Moody's Assigns a Aa3.mx Rating to Vinte Viviendas' Proposed Bond Issuance Partially Guaranteed by the IFC
