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30 Mar 2011
Approximately USD 4.2 million of rated debt affected
Buenos Aires, March 30, 2011 -- Moody's Latin America has affirmed Fanapel's B2 local currency corporate
family rating and its Baa1.uy Uruguay national scale rating and
revised the outlook to stable from negative. At the same time,
Moody's affirmed the B2 and Baa1.uy senior unsecured rating for
Fanapel's USD 4.2 million in outstanding senior unsecured notes
due 2012 issued in Uruguay's domestic debt market.
Fanapel's ratings reflect the consolidated credit profile of its parent
company, Celulosa Argentina S.A. (CASA), given
the operational and financial integration between the two companies,
the cross default clauses in CASA's existing debt agreements and Fanapel's
ability to transfer cash to CASA through inter-company loans and/or
The change in the outlook to stable was prompted by CASA's improved
operating performance and margins amid stronger pulp and paper prices.
We believe CASA's margins will continue to recover over the medium
term given stable demand on its key regional markets and devaluation in
local currency with a positive impact in its costs structure. The
outlook revision also reflects CASA's improved financial flexibility
following the successful amendment of its bank loan covenants and deleveraging,
with an adjusted Debt/EBITDA ratio improving from 5.3 times at
fiscal year ended May 2009 to 2.9 times as of the last twelve months
ended November 2010. CASA is now in covenant compliance.
The B2 and Baa1.uy ratings reflect Fanapel's leadership and
highly recognized brand name in the Uruguayan domestic paper market.
The ratings also reflect CASA's still tight liquidity position,
as it faces short-term debt maturities with cash balances likely
to remain low. The rating incorporates our current expectation
that CASA will be appeal to address its ongoing refinancing needs with
cash flow and reliance on uncommitted bank lending for trade finance and
working capital. However, Moody's is closely monitoring
CASA's margins and cash flow prospects and the impact of potential
underlying weakness in the Argentine economy and uncoated paper prices.
Finally, the rating incorporates our expectation that CASA will
use free cash flow to reduce leverage in the near term.
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 differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country
modifier signifying the relevant country, as in ".mx"
for Mexico. For further information on Moody's approach to national
scale ratings, please refer to Moody's Rating Implementation Guidance
published in August 2010 entitled "Mapping Moody's National Scale
Ratings to Global Scale Ratings."
The stable outlook is supported by Moody's expectation that CASA will
continue strengthening its current credit profile as its margins benefit
from a weaker Argentine Peso against the dollar, since 70%
of its costs are in ARS and 75% of its revenues are in USD.
We believe that CASA will stay in compliance on its covenants, given
improved operating performance.
An upgrade of the ratings could result from improved performance trends,
for example as a result of additional cost initiatives related to chemicals,
energy and wood, or if refinancing risk proves lower than currently
anticipated. Factors that could result in a positive rating action
could include bolstering CASA's liquidity profile , through
debt reduction and strong cash flow generation. Quantitatively,
upward rating pressure could build if CASA's debt to EBITDA, is
sustainable below 3 times and EBITDA to interest above 5 times.
Additionally, a more predictable outlook for economic activity in
Argentina would be important for an upgrade.
A downgrade in the ratings could result from a deterioration in CASA's
sales and margins or from a failure to address near to medium term debt
maturities and reduce overall leverage. The ratings could be downgraded
if CASA's operating performance and liquidity profile persistently weakens.
Quantitatively, a downgrade could result from Debt to EBITDA of
above 6.5 times and/or EBITDA to Interest of below 1 times,
both at the CASA consolidated level.
FANAPEL S.A. is owned by Celulosa Argentina SA (CASA),
an Argentinean company that specializes in kraft pulp and uncoated paper,
with a well-known portfolio of trademarks and products.
Fanapel is the leading company in the Uruguayan paper sector. Fanapel
fulfills 65% of domestic paper demand and generates 80%
of the country's paper exports. For the last twelve months ended
in November 2010, CASA's consolidated revenues reached ARS 1.3
billion and EBITDA was ARS 221 million. Fanapel's reported revenues
for the same period were USD 74 million while its EBITDA was USD 14 million.
Asst Vice President - Analyst
Corporate Finance Group
Moody's Latin America, Calificadora de Riesgo
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Latin America, Calificadora de Riesgo
Moody's changes Fanapel's outlook to stable
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
No Related Data.
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