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Rating Action:

Moody's rates IFH Peru Ltd.'s proposed US dollar note issuance Ba3

29 Nov 2010

New York, November 29, 2010 -- Moody's Investors Service has assigned a Ba3 global scale foreign currency bond rating to IFH Peru Ltd.'s (IFH) proposed debt issuance of approximately US$ 100 million 10-year senior notes. The rating outlook is stable. The rating is subject to receipt and review of final documentation related to the note program.

The notes represent the second series of IFH's 8.625% senior notes due 2019 denominated and payable in US dollars. With this issuance, the total amount of notes outstanding would be US$ 250 million. The notes will be sold under Regulation S of the Securities Act, listed on the Luxembourg stock exchange and governed under New York Law.

The following ratings were assigned to IFH Peru Ltd's US$ 100 million senior notes:

Unsecured senior debt: Ba3, with stable outlook

RATING RATIONALE:

Moody's said that the assignment of the Ba3 rating was based on the following considerations: 1) robust and improving dividend contributions expected for IFH under both expected and highly stressed earnings scenarios, reflecting the strong franchise value and financial metrics of IFH's main operating subsidiaries, particularly Interbank and Interseguro; 2) IFH's moderate debt levels and leverage as a stand-alone holding company; and 3) present and potential cash needs of the group's existing and start-up retail operations over the life of the financing. These operations are not likely to generate material dividends for the next couple of years. The rating also assumes that IFH will continue the group's disciplined approach towards its investments in both retail and real estate-related ventures.

The Ba3 rating for the IFH notes is anchored on the Ba1 stand-alone credit assessment (BCA) of Interbank, the group's largest earnings and dividend generator. However, Interbank is highly regulated by the Peruvian Superintendency of Banks, Insurance, and Pension Funds (SBS) and subject to minimum capital requirements that could affect the upstreaming of dividends to IFH. Moody's said that the two-notch differential between the Ba3 bond rating and the Ba1 rating for the bank also reflects the structural subordination of the holding company's bondholders to all liability holders of the operating companies, particularly bank depositors and insurance policy holders, and to all other creditors of the operating companies, given that the notes are not guaranteed by any of IFH's subsidiaries.

Although the notes will be secured by a first priority lien on a portion of IFH's shares of the common stock of IFS, the holding for the financial services companies, Moody's said this collateral does not enhance its rating of the IFH notes and thus the rating agency views the notes as unsecured obligations of IFH. The notes will rank pari passu in right of payment with all of the present and future obligations of IFH (other than obligations preferred by statute, such as tax and labor obligations) that are not otherwise expressly subordinated.

The Ba3 rating for the IFH notes also takes into account the lack of restrictions on holding company dividends. Moody's said that this risk is not significantly mitigated by the transaction's modest financial covenants or by restrictions on additional debt and new ventures.

In that regard, Moody's noted that the Ba3 rating could come under downward pressure if IFH's stand alone liquidity weakens, either because of weak performance at the subsidiary level or because of higher than anticipated interest costs, such that interest coverage -- as measured by net dividends received relative to financial expenses -- falls below 3.0 times. Moody's also expects IFH to hold at least 12 months of annual debt service in cash or highly liquid securities at all times at the holding company level, in addition to the pre-funding of interest through the Payment Account as provided for in the bond documentation, in order to maintain adequate internal liquidity.

Proceeds from the IFH notes are being used to finance the expansion of IFH's retail and real estate operations. Retail operations are organized under IFH Retail, a wholly-owned intermediate holding company, and include Supermercados Peruanos, a food and general merchandise retailer controlled by IFH since 2003, Tiendas Peruanas, a small department store chain that started operations in 2008, and Financiera Uno, a consumer finance company.

Incorporated in the Bahamas, IFH is also the ultimate holding company for a group of financial services companies, including Banco Internacional del Peru-Interbank, Peru's fourth largest bank, and Interseguro, the leading provider of annuities, the fastest growing product segment of the Peruvian insurance industry.

The main challenges facing IFH in the near term center on the financial risks related to the group's increasing penetration of the retail segment in Peru. Peru's resilient performance through the global financial crisis and positive economic outlook, however, provides a solid platform for continued growth of the group's various operating entities. The IFH group is also well positioned in terms of risk management and distribution which will allow it to take advantage of more robust growth through its well established brands in the sectors in which it operates, said Moody's.

IFH Peru Ltd reported unconsolidated assets of US$ 993.1 million, equity of $813.8 million, and net income of $128.3 million as of September 30, 2010. On a consolidated basis, the group reported total assets of US$ 7.2 billion and equity of $ 860.4 million as of December 31, 2009. IFH is majority owned and controlled by the Rodriguez Pastor family group with a 58.76% stake.

The principal methodologies used in rating IFH Peru Ltd. were Moody's "Bank Financial Strength Ratings: Global Methodology", "Incorporation of Joint Default Analysis into Moody's Bank Ratings: A Refined Methodology", "Moody's Global Rating Methodology for Life Insurers", and "Global Retail Industry," and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and 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
Jeanne Del Casino
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's rates IFH Peru Ltd.'s proposed US dollar note issuance Ba3
No Related Data.
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