Fitch Affirms Mabe's IDR at 'BBB-'; Revises Outlook to Stable

MONTERREY, Mexico--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of Controladora Mabe, S.A. de C.V. (Mabe) as follows:

--Foreign currency Issuer Default Rating (IDR) at 'BBB-';

--Local currency IDR at 'BBB-';

--6.5% senior unsecured notes due 2015 at 'BBB-';

--7.875% senior unsecured notes due 2019 at 'BBB-'.

The Rating Outlook has been revised to Stable from Negative.

The Stable Outlook reflects improvements in Mabe's financial position due to a significant decrease in debt during the last 12-month period (LTM) ended June 30, 2010. The Stable Outlook also incorporates the improvement in the company's business environment. Mabe's ratings continue to incorporate its product and geographic diversification, leading market shares in the countries where it operates, as well as the company's long relationship and joint venture with General Electric (GE). Positively incorporated in the ratings is the company's capacity to generate positive free cash flow during economic downturns.

Mabe's revenues decreased during 2009 to USD3.1 billion from USD4.2 billion during 2008 as a result of lower sale volumes in most of the countries where it has a presence, lower exports to GE in the U.S., and a weakening of average exchange rate for the Mexican peso versus the U.S. dollar. During the first six months of 2010, the company's sales volumes have begun to recover, as most of Latin American countries where Mabe operates, with the exception of Venezuela, have experienced fast economic growth.

Mabe generated USD288 million of EBITDA during 2009 and USD291 million during the LTM ended June 30, 2010. These levels are below the company's average of approximately USD350 million between 2006 to 2008. Mabe's EBITDA margin of 9.2% during 2009 was similar to the levels obtained by the company during 2008 and 2007 of 9.4% and 9%, respectively.

In July 2009, Mabe announced the acquisition of Brazilian appliances manufacturer BSH Continental Electrodomesticos (from BSH Bosch und Siemens Hausgerate). With this transaction, Mabe consolidated its presence in the attractive Brazilian market and doubled its market share to 25% in the home-appliance sector. This development has allowed Mabe to improve its business diversification and compensate for declines observed in other countries, particularly Venezuela.

During the past 18 to 24 months, Mabe has been focused on consolidating its market position, improving its cash flow from operations (CFO), optimization of its working capital, and reducing its total debt levels. During the LTM ended June 30, 2010, the company's CFO reached USD390 million as a result of USD328 million of funds from operations (FFO) and a positive change in working capital of USD 62 million. With less than USD 40 million of capital expenditures and dividends, the company generated USD353 million of free cash flow during the LTM. This has resulted in a reduction of the company's debt to US$747 million as of June 30, 2010 from US$1.083 billion at the end of 2008.

Mabe's main credit metrics have remained relatively stable through the cycle and within the rating category, despite lower volumes, revenues and EBITDA. For the LTM ended June 30, 2010, EBITDA to Interest Expense was 3.2 times (x) compared to 3.0x in 2009 and 3.7x in 2008; for the same period, FFO Interest Coverage jumped to 4.6x from 3.2x and 2.7x respectively. Debt reduction through internally generated cash more than offset lower EBITDA. For the LTM as of June 30, 2010, Mabe's total debt-to-EBITDA ratio and its FFO Adjusted Leverage ratio were 2.5x and 1.8x; in 2009 and 2008 these metrics were 2.7x, 2.7x and 2.6x, 3.7x, respectively. Fitch expects these metrics will remain relatively stable in the future.

Given Mabe's ability to generate strong operational cash flow, the company's liquidity as of June 30, 2010 is adequate with approximately USD82 million in cash and USD 193 million of short-term debt. Liquidity is further supported by committed credit lines of USD130 million. Total debt at June 2010 is primarily comprised of USD200 million senior notes due 2015, USD350 million senior notes due during 2019 and a syndicated loan of USD159 million.

Additional information is available at 'www.fitchratings.com'.

Criteria and Related Research:

--'Corporate Rating Methodology' dated Aug. 13, 2010;

--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers' dated Nov. 24, 2009;

--'Liquidity Considerations for Corporate Issues' dated June 12, 2007.

Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=489006

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

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