NEW YORK--()--Fitch Ratings has today affirmed Grupo ACP Inversiones y Desarrollo's (ACP) Issuer Default Rating (IDR) at 'BB-'. The Rating Outlook is Positive. A complete list of rating actions is provided at the end of this press release.
KEY RATING DRIVERS - IDRs, VRs and SUPPORT RATING
ACP's ratings reflect its industry leading expertise, consistent expansion strategy and expected changes in legal structure that will strengthen its balance sheet. The aforementioned changes will offset ACP's weaker financial performance, as well as delays in the implementation, growth and consolidation of the commercial strategies of its main subsidiaries.
Fitch believes external support cannot be relied upon due to the entity's non-profit nature, underpinning ACP's Support Rating of '5'.
ACP had an operative loss at end-2012 due to the decline of dividend income as well as to the increase in operating expenses. The decline in dividend income was largely due to a similar trend in the profitability of ACP's main revenue generator, Mibanco, which was not able to offset weak financial performance of the smallest subsidiaries as in past periods.
In Fitch's opinion, ACP should be able to reverse its negative results during 2013, supported by an improvement and consolidation of Mibanco's results.
ACP has invested considerable resources to support some key subsidiaries. However these subsidiaries - especially in Mexico and Brazil - have yet to mature and consolidate hence affecting ACP's cash flow generation which fell short of expectations. Fitch expects that the performance of these investments will pick up in the mid-term.
As a non-for-profit organization ACP cannot raise capital, hence the decision to create a holding company (Grupo ACP Corp, ACPC) and open its capital to well know partners that already cooperate with ACP. As part of the transaction, ACP will transfer its operating subsidiaries to the aforementioned new holding company ACPC.
As the group raised funds in international markets, its 'double leverage' (investment in subsidiaries + goodwill/ equity) increased to a peak of 171% in 2012. The cash flow projections consider a fresh capital injection from the new shareholders of ACPC, which once completed should bring ACP's double leverage close to 120%. In addition, it improves liquidity and cover ACP's cash flow needs for the next four years.
ACP has a leading expertise in microcredit since 1969. ACP created Peru's largest microcredit bank (Mibanco) and invested in several microcredit ventures throughout the region amassing a significant expertise and in-depth knowledge of the economic environment and microcredit business in the region. In addition, the creation of ACPC and the incorporation of shareholders/ partners with significant expertise and clout in the microfinance business will enrich ACP's corporate governance and overall technical expertise.
RATING SENSITIVITIES - IDRs, VRs and SUPPORT RATING
ACP's ratings upside potential is largely dependent on a sustained improvement in financial performance of its operating companies and/or improvement of its double leverage ratios to around 120%.
A severe deterioration of profitability or assets quality of its key operating companies, together with a higher leverage would place downward pressure on ACP's ratings.
ACP is a non-for profit civil association active in microcredit throughout the region. It controls Mibanco, Peru's largest microfinance bank and has several related investments in Peru and seven countries in the region.
Fitch has affirmed the following ratings for ACP:
--Long-term foreign currency IDR at 'BB-'; Outlook Positive;
--Short-term foreign currency IDR at 'B';
--Long-term local currency IDR at 'BB-'; Outlook Positive;
--Short-term local currency IDR at 'B';
--Viability Rating at 'bb-';
--Support Rating at '5';
--Support Rating Floor at 'NF'.
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:
--'Global Financial Institutions Rating Criteria' (Aug 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'2013 Outlook Andean Banks' (Dec. 14, 2012).
Applicable Criteria and Related Research
Global Financial Institutions Rating Criteria
Rating FI Subsidiaries and Holding Companies
2013 Outlook: Andean Banks