Category: Corporates

Buenos Aires City, December 04, 2017 — Moody’s Latin America today assigned a B1 local currency global scale corporate family rating (CFR) to Mercado Libre S.R.L.(ML), the Argentina subsidiary of Mercado Libre Inc (MELI, not rated). At the same time, Moody’s assigned a Ba3 local currency global scale rating and an Aaa.ar national scale rating to the up to ARS 4,250 million bank credit facility with Banco de la Nacion Argentina. This is the first time Moody’s rates ML. The rating outlook is stable.

RATINGS RATIONALE

ML’s B1 corporate family rating reflects its well-recognized online retail brand name in Latin America and its leading competitive position in multiple segments and strong operating performance, particularly in its online platform marketplace, which accounts for the majority of the company’s operating income. The ratings are also supported by ML’s significant cash flow generation, low leverage and good liquidity profile which includes cash and short-term investments exceeding USD 95 million at December 31, 2016. With over 5.948 employees and USD 844 million in revenues across the region, Moody’s acknowledges that MELI, ML’s parent company, is the largest internet retailer in Latin America and has a sizable international presence through seven international websites that it operates in Brazil, Argentina, Mexico and Chile, among others.

Given the still limited online business penetration in Latin America, Moody’s believes that online retail business will continue to experience strong growth over the next several years supporting ML’s progress. Moody’s believes ML is well positioned to benefit in Argentina from the consumer trend of increasingly purchasing online as opposed to purchasing in physical formats. However, Moody’s expects online retailing will become more competitive as numerous traditional retailers turn their focus to their online presence and capabilities, which could slow ML growth rates in the long term. The rating acknowledges that ML has other growth opportunities from new geographies it can enter along with new products it can launch in its existing geographies.

Mitigating the company’s credit strengths are its limited size and scale and the fierce competition coming from larger players in the online market that could pressure market share in its main core business.

ML’s Ba3 and Aaa.ar ratings on the bank credit facility with Banco de la Nacion Argentina, one notch above the B1 global scale rating, reflects the strength of the credit line that will be fully secured by ML’s credit card receivables.

The stable outlook reflects Moody’s expectation that ML will be able to maintain its strong market position and regionally well recognized brand name. It also reflects Moody’s expectation that ML will maintain solid operating performance while preserving a good balance sheet and liquidity profile.

ML’s ratings could be upgraded if the company further increases materially its size and scale amidst expected positive growth prospects for the online retail business, while maintaining its strong business and financial profile and a solid liquidity.

ML’s ratings could be downgraded should ML’s market position or operating performance deteriorate to the extent that its credit metrics are negatively impacted and/or should it no longer maintain good liquidity. Quantitatively, ML’s ratings could be downgraded if RCF/net debt fell below 20% or interest coverage was sustained below 2 times.

Headquartered in Buenos Aires, Argentina, Mercado Libre S.R.L is the Argentine branch of Mercado Libre Inc (MELI). MELI is the largest online commerce ecosystems in Latin America and the 7th globally measured by unique visitors. With presence in 18 countries, including Argentina, Brazil, Mexico, Colombia, Chile, Venezuela and Peru, MELI is the leading e-commerce and commercial technology solutions company in Latin America. Based on unique visitors and page views, MELI has a leading market position in most of the countries in which it operates, including Argentina. Their platform in each country is designed to provide users with a complete portfolio of services to facilitate commercial transactions, which includes seven integrated e-commerce services: (i) MercadoLibre Marketplace, (ii) MercadoLibre Classifieds Service, (iii) MercadoLibre advertising program, (iv) MercadoShops online web store solution, (v) MercadoEnvios shipping service, (vi) MercadoPago payments solution and (vii) MercadoCredito.

New York, March 08, 2018 — Moody’s Investors Service (Moody’s) assigned a Baa3 Issuer Rating to Peru LNG S.R.L. (PLNG) and its proposed USD940 million in senior unsecured notes. Proceeds from the notes will be used to refinance existing corporate bonds together with bank debt. The outlook on the ratings is stable.

This is the first time that Moody’s assigns ratings to PLNG.

RATINGS RATIONALE

The Baa3 ratings on PLNG and its USD940 million in proposed senior unsecured notes are supported by its solid credit metrics and financial policies, no volume risk, low supply risk, high facility utilization factor, limited competition risk, minimum foreign exchange risk, strong shareholders support and the high relevance of the company to the Peruvian’s energy industry and trade balance. On the other hand, the ratings also consider the company’s small and single operational asset base as well as its exposure to Liquefied Natural Gas (LNG) price risk, which bring up operating and financial risk.

The proposed notes will have 6 years of grace period and mature in 2030, after the LNG Sale and Purchase Agreement with Shell International Trading Middle East Limited (SITME) expires, in 2028. The mismatch between the maturity of the notes and the expiration of the delivery contract to the off-taker represents a risk that is however mitigated by the payment amortizing feature of the proposed notes. Moody’s estimates that, in 2028, PLNG would owe about USD238 million related to the 2030 notes, which the company would cover with accumulated cash flow from operations.

PLNG has adequate liquidity pro forma for the proposed notes and debt repayment. Moody’s estimates that, after the company issues the notes and repay existing debt, cash on hands will be about USD50 million which favorably compares to USD30 million of minimum cash. Moody’s also estimates that PLNG will generate cash from operations close to USD108 million over the next 18 months. The company’s financial obligations in the period will be about USD42 million (interest expenses) and it will not pay dividends; in turn, capital expenditures will be limited to USD23 million in 2018, mostly for scheduled maintenance purposes.

The stable rating outlook reflects Moody’s expectation that PLNG will sustain its low business risk profile, maintain solid financial policies, and be able to reduce its financial leverage towards management’s target of 3.5-4.0x debt/EBITDA by year end 2019.

PLNG’s Baa3 ratings could be upgraded if it manages to decrease leverage efficiently, as per EBITDA to gross debt, below 3.5 times on a sustainable basis as well as if maintains an interest coverage above 6.5 times, as per EBITDA to interest expense.

PLNG’s Baa3 ratings could be downgraded if its interest coverage, as per EBITDA to interest expense, falls to below 3 times with limited prospects of a quick turnaround. In addition, a deterioration of the company’s liquidity profile and an increase in leverage above to 6.5 times could lead to a rating downgrade.

Founded in 2003 to build, own and operate the first natural gas liquefaction plant in South America, PLNG delivered the first LNG cargo to its sole off-taker, SITME on June 22, 2010. PLNG operates a 4.45 mmtpa liquefaction plant located in Pampa Melchorita (Cañete), a marine terminal, and a 408 km pipeline that transports natural gas from the prolific Camisea fields (Cusco, Peru). The natural gas for the production of PLNG is supplied from Camisea gas fields pursuant to two separate Gas Supply Agreements with Block 56 and Block 88 for a total of 4.2TCF. Peru LNG is 50% owned by Hunt Oil Company (B1 stable), 20% by Royal Dutch Shell Plc (Aa2 stable), 20% by SK Innovation Co. Ltd (Baa1 stable) and 10% by Marubeni Corporation (Baa2 negative). Moody’s estimates that, in 2018, the company’s revenues and assets will reach close to USD500 million and USD2.4 billion, respectively, while adjusted leverage ratio will hover at about 4.6 times debt/EBITDA.

As a first-time issuer in the cross-border bond market, Peru LNG drew keen attention from global investors when it issued a high-yield bond last March. At $940 million, priced at 5.375%, it was the largest private sector bond ever issued from Peru.

The securities featured a 9.25-year average life with 12 semi-annual amortizing payments starting in 2024. The company, which operates a natural gas liquefaction plant, used the proceeds to refinance the outstanding debt it drew upon to build the plant. Its success reflected a number of factors. For starters, investors appreciated the company’s recent investment grade ratings from Moody’s, S&P and Fitch.

The company was also coming to market when there was a lack of supply from Peru. Peru LNG would be only the second Peruvian company to come to market in 2018. Peru LNG also conducted a road show in the US, Latin America and Europe, meeting 92 key investors through one-on-one meetings, events and conference calls. In the end, the order book neared $2.5 billion from 115 investors, an oversubscription rate of 2.6 times.

Initial price talk had been set at the mid-5.000%. Investor appetite allowed Peru LNG to reduce the pricing by 12.5 bps through execution.

New York, May 30, 2018 — Moody’s Investors Service (“Moody’s”) assigned a Baa2 first-time Issuer Rating to Enel Chile S.A. The outlook is stable. At the same time, Moody’s assigned a rating of Baa2 to the up to $1.0 billion proposed senior unsecured notes due 2028.

The proceeds of the issuance will be used to refinance outstanding borrowings, the proceeds of which were used to fund the acquisition of minority shares of its subsidiary Enel Generacion Chile S.A. (Enel Generacion, Baa1 stable) as part of the corporate reorganization concluded in April 2018, which included the incorporation of a new subsidiary Enel Green Power Chile S.A. (EGP Chile).

The Baa2 Issuer Rating reflects Enel Chile’s leading position in the Chilean generation and distribution markets combined with a strong commercial policy, reflective of a relatively comfortable contracted position at prices which are substantially above system marginal costs. Enel Chile benefits from a diversified and efficient energy generation fleet on a consolidated basis, with generation capacity above its short and medium term contracted positions. Furthermore, the issuer has committed to a modest capital investment program focused on increasing its participation in wind and solar power generation projects accompanied by long term power purchase agreements (PPAs).

Credit metrics are expected to remain strong, with CFO pre WC to debt and Interest Coverage expected to be above 25% and 6.5x, respectively, with a comfortable liquidity position. The rating further considers the structurally subordinated nature of the holding company debt to debt at its operating companies. Despite the large representation of holding company debt (expected to be approximately 35%-40% of total consolidated debt), the debt-free nature of subsidiary Enel Distribucion Chile S.A. (Enel Dx) somewhat offsets the issue despite its low representation of total EBITDA (approximately 17% – 20%) and expected dividend distributions (approximately US$50 million per year).

The Baa2 debt rating assigned to the proposed notes maturing in 2028 reflects their senior unsecured nature. The proposed bond indenture includes typical representations, warranties, and limitations on the addition of secured debt and engaging in sale-leaseback transactions. The indenture does not include financial covenants.

Enel Chile is the largest energy generation company in Chile, with a 28% pro-forma market share in 2017 considering the incorporation of EGP Chile as of April 2018. The company’s diversified energy generation mix, combined with its strong commercial policy, contributes to cash flow predictability. Enel Generacion has more than 20TWh per year under contracts at weighted average prices above US$85/MWh until 2022, while EGP Chile has fully contracted its current and expected generation capacity until 2024. The 17%-20% Ebitda contribution from Enel Dx’s regulated distribution business operating in the country’s largest market provides further comfort. Low geographic diversification, with operations limited to the energy sector in Chile (Aa3 negative), limits the rating.

The necessity to sign and/or renew PPA contracts is an important challenge and a key long term risk exposure. Approximately 35% (committed TWh) of PPAs at Enel Generacion expire by 2025, with the increased participation of wind and solar projects in the matrix leading to a shift in the price deck curve within the Chilean market, as shown in the October 2017 regulated auction. The incorporation of EGP Chile allows the company to manage contractual allocations more efficiently based on each subsidiary’s marginal costs and auction price results.

Currently, there is a moderate capex plan in place. While Enel Generacion’s short term plans are relevant, focused on concluding the Los Condores 150-MW hydro plant and the investments in the Bocamina II plant to improve over environmental issues, it is expected to represent less than 2% of net property, plant, and equipment. EGP Chile has a more ambitious plan, expected to increase installed capacity by 60% by 2024, largely focused on solar plants. In relative terms, Enel Dx’s plans are the largest among the three companies, estimated at 11% of net property, plant, and equipment. On a consolidated basis, capex is viewed as moderate, and estimated at around 6% of net property, plant, and equipment. Despite a strong track record in building generation projects and the relatively low complexity of solar projects, the expected generation capacity growth in EGP Chiles subjects the company to construction execution risks.

Even with the incorporation of a more leveraged company in EGP Chile (approximately 4.3x Debt/Ebitda as of September 2017), the company’s consolidated financial profile remains strong (approximately 2.9x Debt/Ebitda as of March 2018), underpinned by the low leverage of Enel Generacion and only intracompany debt at Enel Dx. We expect the company to post consolidated CFO pre WC to Debt and Interest Coverage ratios ranging between 25% – 30% and 6.5x — 7.5x, respectively, over the next five years.

The proposed senior unsecured notes are expected to partially address the company’s most immediate debt maturities, composed of the bridge loans in total amount of US$1.5 billion due in 2019. As of March 2018, the company’s total consolidated cash position was of approximately $650 million. Consolidated committed credit facilities at subsidiary levels, in total amount of more than US$300 million, further support the company’s liquidity profile.

The stable outlook reflects our expectation that Enel Chile’s subsidiaries will continue to successfully execute its commercial policy by focusing on extending its contracted position while maintaining strong credit metrics.