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Global Credit Research - 21 Jun 2010
Approximately US$150 Million in Debt Securities Affected
Mexico City, June 21, 2010 -- Moody's de Mexico downgraded Hipotecaria Su Casita's senior unsecured
debt rating to B2, from B1, national scale issuer rating to
Baa3.mx, from Baa1.mx, and the global scale
local currency issuer rating to B2, from B1. The rating outlook
The rating downgrade reflects the current credit market dislocation which
has pressured and will continue to strain the company's liquidity
and operating margins. Operating statistics as of March 31,
2010 remain stressed with margins and interest coverage at 10.9%
and 1.15x, respectively as well as high debt to assets levels
of 89%. Furthermore, the delinquent portfolio for
Su Casita has increased significantly to 11.6% as of March
31, 2010. Growth at Su Casita has been stalled for the past
twelve months as the company has worked to decelerate the rise in its
delinquent portfolio while maintaining required higher capital levels.
The slowdown in the securitization market, which the sofom relied
upon to fund additional loans is expected to continue this trend;
reliance on SHF for all its funding, like all other independent
mortgage sofols/sofoms, will be virtually 100%.
Moody's current B2 global local currency and Baa3.mx national scale
ratings continue to reflect Su Casita's experienced and conservative management
team. Furthermore, the company has a strong relationship
with SHF and committed shareholders. In April, Su Casita
announced a $370 million Mexican pesos equity contribution by its
shareholders, strengthening its balance sheet. In addition,
the company announced that concurrent with this equity capital infusion
Sociedad Hipotecaria Federal (SHF) provided it with $2 billion
Mexican pesos in credit lines to be used for the issuance of mortgages
and construction loans for the low and low-middle income housing
The negative outlook continues to reflect Moody's expectations that Su
Casita's operating margins, portfolio quality and growth will continue
to be pressured as economic indicators such as the unemployment rate remain
weak (with only modest improvement in 2010) and continued capital markets
dislocation. In addition, regulatory changes in Mexico are
expected for non-bank finance companies by 2011, which could
potentially increase sofoles/sofomes capital requirements. Moody's
will closely monitor the company's capitalization ratio, funding
sources, its relationship with SHF and its shareholders, its
delinquent portfolio as well as the changing regulatory environment in
Mexico as it navigates the very volatile domestic and global capital markets.
Moody's stated that the rating outlook would be revised to stable should
the company maintain its current credit metrics and capitalization ratios
while continuing to lower its exposure to short-term debt.
In addition, Moody's anticipates that the company's delinquent portfolio
(on balance sheet) will continue to deteriorate through the remainder
of 2010, albeit at a slower pace than in 2009, and reach an
inflection point by no later than the end of 2010. The ratings
could face further downward pressure should the company have any liquidity
challenges, margins be consistently negative, while its debt
levels exceed 90% and interest coverage fall below 1x over a 12
month period. Downward ratings pressure would also take place should
the delinquent portfolio (on balance sheet) exceed current levels on a
The following ratings were downgraded with a negative outlook:
Hipotecaria Su Casita, S.A. De C.V.
-- National scale issuer rating to Baa3.mx,
from Baa1.mx; global scale local currency issuer rating to
B2, from B1; corporate family rating to B2, from B1 and
senior notes to B2, from B1.
The last rating action with respect to Su Casita was on May 21,
2009, when Moody's downgraded its senior unsecured debt rating
to B1, from Ba3, national scale issuer rating to Baa1.mx,
from A3.mx, the global scale local currency issuer rating
to B1, from Ba3 and the LT corporate family rating to B1,
from Ba3. The rating outlook was revised to negative from stable.
Su Casita, based in Mexico City, Mexico, started operations
in 1994 as a non-bank financial institution/Sofol Mortgage Company.
Su Casita's main activity consists of extending mortgage loans financed
by monies from SHF to low income individuals -- an important
role in the low-income housing market, as there is no rental
market in Mexico. As of March 31, 2010, the company
reported total assets of approximately $38.6 billion Mexican
pesos, and $2.7 billion Mexican pesos in equity.
Su Casita's ratings were assigned by evaluating factors we believe are
relevant to the credit profile of the issuer, such as i) the business
risk and competitive position of the company versus others within its
industry, ii) the capital structure and financial risk of the company,
iii) the projected performance of the company over the near to intermediate
term, and iv) management's track record and tolerance for risk.
These attributes were compared against other issuers both within and outside
of Su Casita's core industry and the company's ratings are believed to
be comparable to those of other issuers of similar credit risk.
Senior Vice President
Commercial Real Estate Finance
Moody's Investors Service
Commercial Real Estate Finance
Moody's Investors Service
Moody's downgrades Su Casita's ratings to B2/Baa3.mx; outlook remains negative
No Related Data.
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