Fitch Affirms Cimento Tupi at 'RD'

CHICAGO--()--Fitch Ratings has affirmed Cimento Tupi S.A.'s (Tupi) Foreign and Local Currency Issuer Default Ratings (IDRs) at 'RD' (Restricted Default) and its national scale rating at 'RD(bra)'. Fitch also affirmed the company's outstanding notes at 'C' and revised the notes' Recovery Rating to 'RR5' from 'RR4' on weaker recovery prospects.

KEY RATING DRIVERS

Fitch affirmed Tupi's ratings pending the outcome of negotiations between the company and its creditor groups regarding a comprehensive debt restructuring plan. Tupi has missed three interest payments on its 2018 unsecured bonds and has defaulted on payments of principal and interest related to loans with Agricultural Bank of China LTD (USD25 million) and Banco de Desenvolvimento de Minas Gerais - BDMG (BRL120 million). Total outstanding debt is around BRL1 billion, which can be accelerated at the creditors' discretion as most of the company's debt obligations exhibit cross-default clauses.

The 'RD' rating reflects Fitch's opinion that Tupi has experienced an uncured payment default on part of its financial debt obligations but it has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and it has not otherwise ceased operating.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

--Low double digit volume decline in 2016 with modest recovery in 2017;

--High single digit revenue decline in 2016;

--Negative Operating Cash Flow;

--Capital Expenditures of BRL15 million;

--No asset sales.

RATING SENSITIVITIES

Negative Rating Action:

Fitch could revise Tupi's ratings to 'D' from 'RD' if the company enters into bankruptcy filings, administration, liquidation or any other formal winding-up procedure.

Positive Rating Action:

Successful financial restructuring of Tupi's debt and other financial obligations will lead to the 'RD' rating being revised to reflect the appropriate ratings for the issuer's new capital structure.

FULL LIST OF RATING ACTIONS

Fitch has affirmed Tupi's ratings as follows:

--Long-Term Foreign Currency IDR at 'RD';

--Long-Term Local Currency IDR at 'RD';

--Long-Term National Scale Rating at 'RD(bra)'.

--Senior unsecured notes at 'C'; Recovery Rating to 'RR5' from 'RR4'.

Date of Relevant Rating Committee: [03, June, 2016.]

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

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005595

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005595

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Contacts

Fitch Ratings
Primary Analyst
Debora Jalles
Director
+1-312-606-2338
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60604
or
Secondary Analyst
Phillip Wrenn
Associate Director
+1-312-368-2075
or
Committee Chairperson
Ricardo Carvalho
Senior Director
+55 -21-4503-2627
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Debora Jalles
Director
+1-312-606-2338
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60604
or
Secondary Analyst
Phillip Wrenn
Associate Director
+1-312-368-2075
or
Committee Chairperson
Ricardo Carvalho
Senior Director
+55 -21-4503-2627
or
Media Relations:
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com