News Column

Fitch: Mexichem's Ratings Unaffected Following Recent Acquisition Announcements

August 21, 2014



MONTERREY, Mexico--(BUSINESS WIRE)-- Fitch's ratings of Mexichem, S.A.B. de C.V. (Mexichem) are unaffected following the company's recent announcements regarding its intent to acquire Dura-Line Corporation (Dura-Line) and VESTOLIT GmbH (Vestolit) under separate agreements for a combined total amount of approximately USD921 million. In Fitch's view, these transactions are part of the company's previously laid-out multi-year investment plan.

Fitch's analysis incorporates the company's strong commitment to support a robust financial profile and that these investments will be completed likely toward the end of 2014 with a combination of available cash, operating cash flow and debt. Fitch estimates Mexichem's net leverage could reach 2.3x by year-end 2014 assuming no material EBITDA contribution from the announced transactions. Incorporated in the ratings is a firm plan to reduce net leverage to below management's target of 2x once the new operations have been fully consolidated for 12 months. As of June 30, 2014, the company's liquidity was supported by cash and temporary investments of just over USD1 billion as well as by USD1.5 billion of committed credit facilities. During the last 12 months ended June 30, 2014, Mexichem generated USD863 million of EBITDA and its net debt-to-EBITDA ratio was 1.3x.

In Fitch's view, if both transactions conclude favorably, Mexichem will expand its geographic footprint, product portfolio, technology and end-market diversification, as well as strengthen its vertical integration. Vestolit is Europe's sixth largest PVC manufacturer; its products have various applications particularly in the building products (primarily as a raw material for the manufacturing of window frames, flooring, and wall paper) and automotive industries (underbody coatings). Dura-Line is a manufacturer and distributor of communication and energy infrastructure products including High Density Polyethylene (HDPE) conduits, and pressure pipes, with operations in the U.S., Mexico, India, South Africa and Middle East.

Mexichem's ratings consider management's commitment to maintaining a strong financial profile, the company's recurring positive free cash flow, and its strong business profile as a leading vertically integrated chemical and petrochemical company in Mexico, with a geographically diversified operating base and low cost structure. The company has important market shares and presence in Latin America, U.S., Europe and Japan.

Fitch currently rates Mexichem as follows:

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

--Local currency IDR 'BBB';

--Long-term national scale rating 'AA+(mex)';

--USD350 million senior unsecured notes due 2019 'BBB'; (outstanding balance USD83 million);

--USD750 million senior unsecured notes due 2022 'BBB';

--USD400 million senior unsecured notes due 2042 'BBB';

--MXN4,500 million Local Certificados Bursatiles due 2016 'AA+(mex)';

--MXN3,000 million Local Certificados Bursatiles due 2022 'AA+(mex)'.

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

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.



Fitch Ratings

Gilberto Gonzalez, CFA, +52-81-8399-9100

Associate Director

Fitch Mexico S.A. de C.V.

Prol. Alfonso Reyes 2612

Monterrey, N.L., Mexico

or

Debora Jalles, +55-21-4503-2600

Director

or

Committee Chairperson:

Sergio Rodriguez, CFA, +52-81-8399-9100

Senior Director

or

Media Relations:

Elizabeth Fogerty, New York, +1-212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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