S&P rates Nemak notes BB+

S&P said it assigned a BB+ rating to Nemak SAB de CV's proposed $500 million senior unsecured notes due 2025.

The agency also said it assigned a recovery rating of 3 to the notes, indicating 50% to 90% expected default recovery.

The ratings on Nemak, including its BB+ long-term corporate credit rating, are unchanged.

The proceeds will be used to refinance its existing $500 million senior unsecured notes due 2023.

The proposed transaction is expected to improve Nemak's debt-maturity profile by extending the average debt term to about six years from about five, further supporting the capital structure assessment on the company, S&P said.

The agency also said it considers the transaction will reduce Nemak's cost of debt and will equalize covenants with those of its euro-denominated senior unsecured notes due 2024.

In connection with the notes offering, the recovery rating on Nemak's outstanding senior unsecured notes is unchanged at 3, indicating 50% to 90% expected default recovery.

S&P also said it takes additional comfort from the fact that Nemak's debt instruments are fully, unconditionally and irrevocably guaranteed on a senior unsecured basis by its most important subsidiaries, which accounted for 69.8% and 78.4% of the company's consolidated assets and EBITDA, respectively, as of Sept. 30, 2017.

Alfa SAB de CV owns 75.24% of Nemak, S&P noted.

The agency said it views Nemak as a moderately strategic subsidiary to Alfa because it believes the company is important to the group's long-term strategy and is likely to receive support, if necessary.

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