CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded Arendal, S. de R.L. de C.V.'s (Arendal) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'RD' (Restricted Default) from 'C'. Concurrently, Fitch has affirmed the long-term rating on Arendal's outstanding senior unsecured debt issuances totaling USD100 million at 'C/RR4'.
KEY RATING DRIVERS
The downgrade to 'RD' follows the uncured expiry of a 120-day forbearance period signed on the initial expiration of the notes on May 23, 2016. Fitch considers the uncured expiry of a default forbearance period a restricted default given it represents a material reduction in terms compared with the original contractual terms.
The company continues negotiating with bondholders and seeks to reach an agreement in the near term.
RATING SENSITIVITIES
The company's ratings could be revised to 'D' from 'RD' pursuant to Fitch's rating definition. An upgrade is unlikely at this time.
LIQUIDITY
Arendal's liquidity position is insufficient relative to near-term debt maturities and projected negative cash flow generation. The company's cash balance as of March 31, 2016 was MXN925 million, compared to MXN3.6 billion of short-term debt maturities.
FULL LIST OF RATING ACTIONS
Fitch has taken the following ratings actions:
Arendal, S. de R.L. de C.V.
--Long-Term Foreign and Local currency IDRs downgraded to 'RD' from 'C';
--Senior unsecured notes due 2016 affirmed at 'C/RR4'.
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/site/re/869362
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1012135
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012135
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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