Fitch Top 10 Most-Actively Traded LatAm Corporates: Cencosud Leverage Decrease Key to Stable Outlook

NEW YORK--()--For Cencosud S.A., gross adjusted leverage below 3.5x would result in a revision of the company's Rating Outlook to Stable from Negative, according to Fitch Ratings. Fitch details its scenario analysis for Cencosud in the latest report in its new series 'Top 10 Most-Actively Traded LatAm Corporates'.

One report in the series will be released each day through Feb. 13th per the schedule found at the bottom of this release.

'The scenario analysis that most easily led to gross adjusted leverage below 3.5x by 2016 was revenue growth of 9% per year, capex of less than USD600 million per year, flat working capital requirements and a growth in EBITDAR margins to 9.25% from 8.5%,' said Jose Vertiz, Director.

A Stable Outlook is also contingent upon adequate liquidity reflected in low levels of short-term debt and a manageable debt.

Fitch expects proceeds from the execution of the joint venture transaction with Banco of Nova Scotia to be used to reduce debt levels. Assuming the company uses 100% of the transaction proceeds, estimated in USD1.2 billion, the company's adjusted gross and net leverage are forecast at 4.5x and 4.3x, respectively.

Cencosud's main task during the next 24 months is to accelerate business growth and improve margins, despite facing weak business conditions. Moderate revenue growth during 2015, most likely in the single digits, is expected.

Supermarket margin trends are crucial for cash flow generation in 2015. The supermarket segment will represent approximately 64 percent of the company-adjusted EBITDA after the JV transaction.

Company capacity to improve and stabilize Brazilian and Colombian operations, which are its most problematic markets, will be essential for margin growth.

A key aspect of the company's stated goal of maintaining its investment-grade rating is its management of capex to levels necessary to generate adequate levels of FCF. This will likely require the company to forego growth opportunities, something it has not consistently done in the past.

Fitch will release one report per day in its 'Top 10 Most Actively Traded LatAm Corporates' series as follows:

Feb. 2: Oi Scenario Analysis - Asset Sales and Industry Consolidation are Key to Credit Profile Recovery

Feb. 3: Cemex Scenario Analysis - Road to Investment Grade Runs through the U.S.

Feb. 4: Ecopetrol Price and FX Sensitivity Analysis - Rating Linkage with Sovereign Could Weaken

Feb. 5: America Movil Scenario Analysis - No Separation Anxiety

Feb. 6: Vale Scenario Analysis - Ratings Rock Solid Despite Industry Softness

Feb. 9: Pacific Rubiales Scenario Analysis - Preserving Liquidity Depletes Reserves

Feb. 10: PDVSA - Something's Gotta Give

Feb. 11: Cencosud Scenario Analysis - What Factors Could Stabililze the Company's 'BBB-' Rating

Feb. 12: Construtora Norberto Odebrecht Scenario Analysis - Could CNO Lose its Investment Grade Rating due to Lava Jato Scandal?

Feb. 13: Petrobras - A Political Labyrinth

The full report, titled 'Cencosud S.A. Scenario Analysis' is available on the Fitch Ratings web site at 'www.fitchratings.com'.

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

Applicable Criteria and Related Research: Cencosud S.A. -- Scenario Analysis (What is Required to Maintain Investment Grade?)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861610

Oi, S.A. Scenario Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861188

CEMEX, S.A.B. de C.V. (Investment-Grade Path Runs Through the U.S.)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861420

Ecopetrol Price and FX Sensitivity Analysis (Rating Linkage with Sovereign Could Weaken)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861405

America Movil S.A.B. de C.V. -- Scenario Analysis (No Separation Anxiety)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=860791

Vale S.A. - Scenario Analysis (Ratings Rock Solid Despite Industry Softness)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861440

PDVSA - Something's Got to Give (Focus Shifts to Recovery as $50 per Barrel Oil Makes Default a Real Possibility)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861827

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Jose Vertiz
Director
+1 212-908-0641
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Jose Vertiz
Director
+1 212-908-0641
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com