Fitch Downgrades Sidetur and Sidetur Finance B.V. IDRs to 'C'

CHICAGO & CARACAS, Venezuela--()--Fitch Ratings has downgraded the following ratings of Sidururgica del Turbio S.A. (Sidetur):

Sidetur S.A.

--Foreign currency Long Term Issuer Default Rating (IDR) to 'C' from 'CCC'; Watch Negative;

--Local currency Long Term IDR to 'C' from 'CCC'; Watch Negative;

--National scale rating to 'C(ven)' from 'CCC(ven)'.

Sidetur Finance B.V.

--USD100 million unsecured notes due 2016 issued by Sidetur Finance B.V., a wholly owned subsidiary of Sidetur to 'C/RR4'; from 'CCC/RR4'; Watch Negative.

Fitch has affirmed the following rating of Sidetur S.A.

--National short-term rating at 'C(ven)'.

The Rating Watch Negative has been removed.

The downgrade follows the technical default on the USD100 million unsecured notes issued by Sidetur Finance B.V. that was triggered as a result of the restricted cash account not being replenished by the due date to USD7.6 million with creditors being notified by the trustee in a letter on Jan. 30, 2013. This technical default has a 60-day cure period.

If the restricted cash account is not replenished within the cure period expiring in late March 2013, the notes will be in default of a committed payment obligation. Due to the circumstances of Sidetur's assets, which are under the control of the government of Venezuela, and the ongoing issues surrounding the payment for the seized assets to Sidetur and its parent Sivensa, Fitch does not anticipate the restricted cash being replenished within the cure period.

The scheduled coupon payment of principal and interest on the notes of USD3.2 million was paid from the restricted cash account on Jan. 20, 2013. The balance left in the restricted cash account is sufficient to cover the scheduled coupon payment on April 20, 2013. After this date, absent restricted account replenishment, the coupon payment due on July 20, 2013 will not be met.

The Recovery Rating of 'RR4' is maintained on the notes, and reflects anticipated recoveries of 30% - 50%. This follows the application of Fitch's 'Country Specific Treatment of Recovery Ratings' criteria where Venezuela has a 'soft cap' at RR4. There are no assets remaining on the Borrower's balance sheet, but the noteholders' recovery prospects are somewhat supported by the Venezuelan government's track record for paying for nationalized assets, such as the payments made to Cemex and Sidor for their expropriated assets in Venezuela. The length of time to resolve the compensation issue remains unclear, as does the final value to be received, and will likely be settled through a long, drawn-out process.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug.8, 2012);

--'National Ratings Criteria (Jan.19, 2011);

--'Evaluating Corporate Governance' (Dec.12, 2011);

--'Parent and Subsidiary Rating Linkage' (Aug.8, 2012)

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Evaluating Corporate Governance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=694649

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Contacts

Fitch Ratings
Primary Analyst
Jay Djemal
Director
+1-312-368-3134
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Julio Ugueto. +58 212-286-3232 ext.109
Associate Director
or
Committee Chairperson
Dan Kastholm, CFA, +1-312-368-2070
Managing Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Jay Djemal
Director
+1-312-368-3134
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst
Julio Ugueto. +58 212-286-3232 ext.109
Associate Director
or
Committee Chairperson
Dan Kastholm, CFA, +1-312-368-2070
Managing Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com