Fitch cuts Grupo Famsa

Fitch Ratings said it downgraded Grupo Famsa, SAB de CV’s long-term local currency, foreign currency issuer default ratings and the national long-term rating to RD from C on the completion of Famsa’s exchange offer. Fitch considers the debt exchange, which closed on Dec. 10, as a distressed debt exchange under Fitch’s DDE criteria. Subsequently, Fitch reassessed and upgraded the IDRs and the national long-term rating to CCC- post completion of the exchange.

The CCC- ratings reflect that Famsa hasn’t eliminated the refinancing risk for the untendered $59.1 million notes due in June 1, 2020 and there still are credit concerns of high debt burden and weak FCF generation. The ratings also reflect Famsa’s high execution risk in the company’s strategy, amid a very competitive market and expectations of soft consumer demand, Fitch said.

Fitch assigned a CCC-/RR4 rating to Famsa’s $80.9 million 9¾% senior notes due 2024 which were issued from the exchange offer.

The agency upgraded the rating on Famsa’s untendered $59.1 million 7¼% senior unsecured notes due June 1, 2020 to CC/RR5, reflecting the lower recovery prospects and lower levels of creditor protection as the exchange’s percentage of acceptance eliminated restrictive covenants and certain events of default included in the 2020 senior notes indenture. Fitch withdrew the rating of Famsa’s untendered 2020 unsecured notes that were partially exchanged for the new 2024 notes.

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