Fitch: Negative Rating Action Could Follow Camposol's Debt Exchange
OREANDA-NEWS. According to Fitch Ratings, a negative rating action could occur if Camposol does not fully complete its refinancing solution with committed bank lines or shareholder funds to cover the remaining amount of notes outstanding which do not participate in the debt-exchange. The negative rating action will reflect limited refinancing options for the remaining notes due in February 2017 and liquidity would remain constrained.
Camposol has announced it received tenders from 73.77% of holders of its existing notes as of May 20, 2016, representing USD147,542,000, of the aggregate USD200,000,000 principal amount of notes outstanding. It is, however, below the minimum tender condition of 95% announced in the initial debt-exchange proposal. The company has announced its intention to settle the exchange offer at the current participation level. Fitch believes that repayment of the remaining 26.33% (USD52,458,000 principal amount of existing notes) should be covered by a shareholder injection or committed lines of credit at the time of the debt-exchange transaction closing to reduce refinancing risk of the remaining notes and to avoid a downgrade.
The main proposal of the debt-exchange is to extend the maturity of Camposol's existing notes due in February 2017. The new notes would mature in 2021. Post-transaction, if refinancing risk persists for the remaining notes while liquidity shrinks, a negative rating action could follow.
Fitch believes sources of liquidity - additional cash from the company's own cashflow generation - such as new credit loans and/or equity injections should be committed to repay the remaining bonds. In addition to a higher interest rate for the new notes compared to the existing notes (10.5% vs 9.875%), the company has offered to pay a participation fee equal to 1.00% of the principal amount of existing notes tendered in an effort to increase the holders' participation in the exchange offer. Post-transaction, the cash position of the company would be reduced by USD10 million. The company is looking for extensions of its existing lines of credit. After settlement of the exchange offer (expected on May 26, 2016), the company intends to contact holders of existing notes who have not participated in the exchange offer in order to obtain additional exchanges for new notes.
Fitch currently rates Camposol Holding Ltd. and Camposol S.A. as follows:
Camposol Holding Ltd.
--Long-Term foreign currency Issuer Default Rating (IDR) 'B-';
--Long-Term local currency IDR 'B-'.
--Long-Term foreign currency IDR 'B-';
--Long-Term local currency IDR 'B-';
--Senior unsecured notes 'B-/RR4';
--Senior secured notes 'B-/RR4exp'.
The Rating Outlook is Negative.