Fitch Rates InRetail Real Estate Corp.'s Proposed Sr. Unsecured Local-currency Notes 'BB'

NEW YORK--()--Fitch Ratings has assigned the following expected rating to InRetail Real Estate Corp. (InRetail Real Estate):

--Proposed Local-currency senior unsecured notes 'BB' (Exp), to be issued by InRetail Shopping Malls.

Fitch currently rates InRetail Real Estate as follows:

--Foreign currency Issuer Default Rating (IDR) 'BB';

--Local currency IDR 'BB';

--Unsecured USD350 million notes due 2021 'BB' (issued by InRetail Shopping Malls).

The Rating Outlook is Stable.

InRetail Real Estate Corp.'s initial rating action commentary released on June 25, 2014 is listed below.

The proposed local-currency transaction will be issued by InRetail Shopping Malls, a fully owned subsidiary of InRetail Real Estate. The notes will be fully and unconditionally guaranteed by InRetail Real Estate Corp. and the following subsidiaries of the issuer: Interproperties Holding, Interproperties Holding II, Real Plaza S.R.L., and InRetail Properties Management S.R.L.

The target amount of the proposed issuance is S/.100 million (USD35 million)- up to S/.200 million (USD70 million); the final amount of the issuance will depend on market conditions. Proceeds from the 20-year proposed issuance will be used entirely to refinance debt.

KEY RATING DRIVERS

The ratings reflect the company's solid business position, stable and predictable cash flow generation, expected levels of leverage, liquidity, and unencumbered assets post-proposed issuance, strong credit linkage with its parent company Intercorp Retail Inc. (Intercorp Retail), positive industry momentum riding on Peru's favorable economic environment, and the low working capital requirements of the industry, with tenants responsible for most property maintenance expenses.

The ratings incorporate InRetail Real Estate's asset and tenant concentration risk. Fitch views the credit linkage between InRetail Real Estate and its parent company Intercorp Retail - rated 'BB', Outlook Stable - as strong reflecting the operational and strategic ties between these entities. InRetail Real Estate's ratings are constrained by Intercorp Retail's high adjusted net leverage driven by significant levels of capex and inorganic growth in recent years.

RATING SENSITIVITIES

Negative Rating Actions:

--Fitch would consider a negative rating action if the company's financial profile deteriorates due to some combination of the following factors: adverse macroeconomic trends leading to weaker credit metrics, significant dividend distributions, and higher than expected vacancy rates or deteriorating lease conditions. A rating downgrade could be also triggered by deterioration in the group's retail operations resulting in Intercorp Retail Inc.'s inability to reduce its net adjusted leverage in line with expectations incorporated in the ratings.

Positive Rating Actions:

--Fitch would consider a positive rating action as a result of the combination of the following factors: Improvement in InRetail Real Estate's net leverage, liquidity and unencumbered assets at levels above those incorporated in the ratings coupled with Intercorp Retail reaching a significant business deleverage in the next 12 to 18 months ended in December 2015.

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

Applicable Criteria and Related Research:

--'Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage' (May 28, 2014);

--'Fitch Rates InRetail Real Estate Corp.'s IDR 'BB'; Proposed Sr. Unsecured Notes 'BB'' (June 25, 2014);

--'Peruvian Shopping Mall Industry Dashboard' (July 02, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Peruvian Shopping Mall Industry Dashboard

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=840722

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Contacts

Fitch Ratings
Primary Analyst
Jose Vertiz, +1 212-908-0641
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Josseline Jenssen, + 51-999-108-046
Director
or
Committee Chairperson
Daniel R. Kastholm, CFA, +1 312-368-2070
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Jose Vertiz, +1 212-908-0641
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Josseline Jenssen, + 51-999-108-046
Director
or
Committee Chairperson
Daniel R. Kastholm, CFA, +1 312-368-2070
Managing Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com