BRL 300 Million of Debt Securities Affected
Sao Paulo, December 13, 2010 -- Moody's has assigned a B1 local currency rating and Baa2.br Brazilian
national scale rating to Inpar S.A.'s ("Inpar") proposed
BRL 300 million senior secured 5-year debentures. At the
same time, Moody's affirmed Inpar's B1/Baa2.br corporate
family ratings ("CFR"). The outlook for the ratings is stable.
-BRL 300 million 5-year senior secured debentures:
B1 (global scale) / Baa2.br (Brazilian national scale)
- Corporate Family Rating: B1 (global scale) / Baa2.br
(Brazilian national scale)
"Inpar's B1 corporate family rating reflects its strong brand name
in the homebuilding industry, where the company is one of the market
leaders in the southeast region of Brazil, as well as the ownership
by Paladin Prime Residential Investors (Brazil), LLC ("Paladin"),
a company with long experience in real-estate in many emerging
markets", said Moody's Analyst, Marcos Schmidt.
"The ratings also reflect the strengthened capital structure following
the issuance of BRL 180 million in new equity in 2009 and an additional
BRL 280 million in 2010, the proven good liquidity in the company's
assets, which enabled the company to raise BRL 200 million from
June 2008 to April 2009 and the company's solid track record of more than
BRL 7.0 billion in PSV ("Potential Sales Value") launched and more
than 15,000 units delivered (equivalent to around BRL 5.0
billion in PSV) since 1995", added Schmidt.
The B1 rating is further supported by the benefits of pent-up housing
demand in Brazil, especially among the lower-income market,
the segment that will represent the vast majority of the future launches
(83%), with units priced below BRL 350,000.
The government support and incentives toward lower-income housing,
management and corporate governance enhancements after the takeover by
Paladin in 2008 as well as the committed lines for construction that Inpar
has available with commercial banks and are funded by SFH ("Sistema Financeiro
de Habitação") are seen as rating positives.
However, Inpar's B1 corporate family rating is constrained by the
company's relatively small size when compared to its international peers
and certain local competitors, and its poor financial strategy track
record under the previous controlling group. Other factors constraining
Inpar's rating include limited internal cash flow generation, given
the stage of the projects that were launched after the IPO in 2007,
and its dependence on Caixa Econômica Federal ("CEF") (A3/STA) or
other commercial banks for financing a large portion of its sales and
the homebuyer's credit quality at the end of the construction process
especially with the shift in focus towards the lower income segments.
Furthermore, the ratings consider Inpar's geographic concentration
of its landbank in the southeast region of Brazil and in the lower income
segment, and execution risks associated with its strategy of growing
in the low-income housing market, given the large number
of competitors, some of which have a high level of expertise in
this segment. The risk of operating in the lower-income
segment is partially mitigated by Inpar's experience in operating in this
segment since 1999 through joint ventures ("JVs"), and through its
low and mid-income brand ViVer that has delivered 5,000 units
valued at approximately BRL 1.5 billion, and by the smaller
size of many of its competitors which enhances Inpar's relative
bargaining power with suppliers, land owners, banks and homebuyers.
At the end of September, 2010 the company had BRL 212 million of
cash on balance sheet and BRL 339 million of ST debt, despite the
small proportion of cash compared to ST debt we have to take in account
that most of the debt coming due during the next twelve months,
around 80%, are linked to projects that will be also delivered
during the same period. These projects will be delivered to the
homebuyers after they get their mortgages from CEF or other commercial
banks, the mortgages will then pay down the ST loans. The
projects being delivered during the 4Q'10 have a PSV of BRL 205
million, while there are BRL 1.4 billion more in PSV being
delivered during 2011. Only around 20% of the ST debt is
related to corporate debt, leaving the company with a comfortable
debt maturity schedule.
Besides the BRL 300 million proceeds from the proposed secured debentures,
the company has around BRL 600 million available in SFH loans that are
sufficient to finance the construction of all its already launched projects.
At the end of September, 2010 Inpar had a landbank with a PSV of
BRL 11.2 billion of which BRL 3.8 billion (34%) can
be launched during the next three years according the company's current
operating capacity, 80% of those launches are focused in
the middle and low income segments. It is important to note that
the company already has signed 100% of the financing to launch
and build all the BRL 3.8 billion.
A corporate family rating is an opinion on the expected loss associated
with the debt obligations of a group of companies assuming that it had
one single class of debt and is a single consolidated legal entity.
Specific debt instruments for the same corporate family may be rated differently,
depending on their seniority and guarantors, as compared to other
debt instruments issued by the group.
Moody's assigned a B1 rating on the global scale and Baa2.br
on the Brazilian national scale to Inpar's proposed BRL 300 million
senior secured 5-year debentures, the same level as the corporate
family ratings. The ratings consider the sizable amount of secured
debt in Inpar's capital structure of almost 100% and the
likelihood that the secured proportion will stay at this level given the
reliance on SFH loans.
Inpar's B1 local currency corporate family rating reflects its global
default and loss expectation, while the Baa2.br national
scale rating reflects the standing of its credit quality relative to other
domestic issuers. Moody's National Scale Ratings (NSRs) are intended
as relative measures of creditworthiness among debt issues and issuers
within a country, enabling market participants to better differentiate
relative risks. NSRs in Brazil are designated by the ".br"
suffix. Issuers or issues rated Baa2.br demonstrate average
creditworthiness relative to other domestic issuers. NSRs differ
from global scale ratings in that they are not globally comparable to
the full universe of Moody's rated entities, but only with other
rated entities within the same country.
The stable outlook assumes that the demand for lower income housing and
financing to homebuyers will remain steady and Inpar will be able to execute
its planned launches through 2012, and that the returns on cash
invested in the construction of projects since 2007 will materialize in
2011 improving the company's cash flow based debt protection metrics.
The stable outlook also assumes that the company will maintain the minimum
cash balance of BRL 200 million as to preserve healthy liquidity and a
cushion to face eventual weaker economic environment and more difficult
capital market conditions.
Although unlikely in the near term Inpar's rating or outlook could experience
upward pressure if the company improves its cash-flow based credit
metrics through reduced working capital requirements over time.
Mortgage availability at an earlier point in the construction cycle,
which is more common in the lower income and middle-income segments
in which the company is increasing its presence, are an important
factor in Inpar's ability to reduce its sizable investments in working
capital. Quantitatively, positive pressure could arise from
sustainable positive cash flow from operations, total debt/capitalization
maintained below 40% (45.1% at the end of September,
2010) and interest coverage (EBIT / Interest) above 6 times (2.0
times in the last twelve months ended in September, 2010) on a sustainable
Inpar's ratings or outlook would likely suffer downward pressure if Total
Debt to Capitalization ratio is sustained above 50% (45.1%
at the end of September, 2010) or if the company were to face a
significant deterioration in the quality of its receivables, especially
in a more adverse macro-economic scenario. A downgrade could
also be triggered by a deterioration in Inpar's liquidity profile due
to a reduction in the availability and timeliness of disbursements from
SFH credit lines that the company has actually available with CEF and
The principal methodology used in rating Inpar S.A. was
Global Homebuilding Industry rating methodology published in March 2009.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
Headquartered in Sao Paulo, Brazil, and founded in 1992,
Inpar is an integrated homebuilder historically focused in high-rise
construction for the middle and mid-high income families.
Inpar has a solid track record of operations having delivered more than
15,000 units since 1995. Concentrated in the southeast region,
mainly in São Paulo, Inpar has changed its main focus towards
the middle and low income segments. The company is also involved
in commercial, tourism and land development segments spread across
17 states targeting all income brackets. Inpar had net revenues
of BRL 655 million during the last twelve months ended in September 2010.
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's 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.
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Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
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Please see the ratings disclosure page on our website www.moodys.com
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Corporate Finance Group
Moody's America Latina Ltda.
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's America Latina Ltda.
Moody's assigns a B1/Baa2.br rating to Inpar's senior secured debentures
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