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Global Credit Research - 20 May 2014
New York, May 20, 2014 -- Moody's Investors Service assigned a B2 rating to the up to USD600 million
guaranteed senior unsecured notes due in 2019 proposed by Empresas ICA,
S.A.B. de C.V. (ICA), and unconditionally
and irrevocably guaranteed by CICASA (Constructoras ICA), CONOISA
(Controladora de Operaciones de Infraestructuras) and CONEVISA (Controladora
de Empresas de Vivienda), the principal operating subsidiaries of
ICA. Joint ventures and project companies do not guarantee the
notes. The net proceeds from the issuance will be primarily used
to repay short term debt and to pay the tender offer for USD 150 million
under its USD 350 million global notes due in 2017. The outlook
..Issuer: Empresas ICA, S.A.B.
....Senior Unsecured Regular Bond/Debenture,
ICA's B2 ratings are based on the company's weak credit metrics related
to debt leverage and interest coverage as well as weak liquidity.
The ratings also factor ICA's high dependence on short term bank debt
renewals as well as asset sales to fund operations and committed equity
injections to its portfolio of concessions. Supporting ICA's ratings
are its leading position in the construction industry in Mexico,
its long-term track record of participating in the largest construction
and infrastructure projects in the country, and the company's diversified
and solid portfolio of concessions in the road, airport, water
treatment, and ports, among others, most of which have
solid margins and favorable earnings prospects.
ICA's liquidity risk is high. The company had about MXN 5 billion
in cash as of March 31, 2014, which negatively compares with
approximately MXN 10.4 billion in debt maturing in the next 12
months and about MXN 2.1 billion in capex related to committed
equity contributions to concessions, which must be funded before
the end of 2014. To some extent, the new USD600 million notes
will reduce that risk, as net proceeds will be used to repay short
term debt and to extend the maturity of a USD 150 million portion of the
USD 350 million global notes due in 2017. Pro forma for the issuance,
short term maturities will reduce to around USD 6.9 million,
out of which around MXN 3.9 million will be related with its construction
business and MXN 2.4 million will be at corporate level.
ICA's liquidity has historically been influenced by working capital
swings related to the construction business. For this purpose,
ICA depends on approximately MXN 20 billion in uncommitted revolving credit
lines. Somewhat mitigating liquidity risk is ICA's solid
banking relationships as well as the additional liquidity that could get
from its concessions portfolio. In our most recent estimation,
the four most important projects in ICA's portfolio of 17 concessions
are worth about MXN 8 billion.
The negative outlook on ICA's ratings reflects the current weak operating
performance at the construction business given the low number and aggregate
peso amount of infrastructure projects sponsored by the Mexican government
so far in 2013. The negative outlook also takes into account our
belief that upcoming construction projects, when announced,
will take some time to materialize in terms of cash inflows to ICA given
the lengthy drafting and bidding process usually related to large infrastructure
projects. We could stabilize the outlook in the next 12 to 18 months
if there is better visibility about the cash flows from construction business
in Mexico, particularly for ICA. We will also consider any
additional debt that ICA would choose to raise to participate in new construction
It is unlikely that ICA's ratings will be upgraded in the next 12 to 18
months. However, if the company's maturing concession portfolio
either increase dividends to ICA or is monetized via asset sales,
with the proceeds used for significant debt reduction, a positive
credit momentum could develop. In this regard, the ratings
could be positively affected if the company manages to reduce its consolidated
Moody's-adjusted leverage to around 8 times and reported leverage
at construction business below 4 times on a sustained basis, while
maintaining positive revenue growth. For an upgrade to be considered,
ICA's operating margins should be stable and it would have to maintain
a backlog sufficient to cover at least 12 months of execution.
ICA's ratings could be downgraded if the company's liquidity position
worsens with limited prospects for a short-term improvement,
if we believe that revenue or margins during the next 12 to 18 months
will be weaker than expected, if debt leverage increases further,
or if it becomes difficult for the company to renew its revolver credit
lines, which today fund its working capital needs.
Before today's action, the last action on ICA was on September 9,
2013 when Moody's confirmed ICA's Corporate Family and the senior unsecured
ratings of B2 concluding the review for downgrade initiated in May 17,
2013 and changed the outlook to negative.
The principal methodology used in this rating was Global Construction
Methodology published in November 2010. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
Headquartered in Mexico City, ICA is the largest engineering,
procurement and construction company in Mexico and the largest provider
of construction services to both public and private-sector clients.
In the last twelve months ended in March 31, 2014, ICA's revenue
as reported and Moody's adjusted EBITDA margin were about USD2.4
billion and 24% respectively. ICA is also the main sponsor
in 17 concessions, from toll roads to water treatment plants,
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Marianna Fernandes Rodrigues Waltz
Associate Managing Director
Corporate Finance Group
Moody's assigns B2 rating to ICA's new global notes
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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