Fitch puts Mexarrend on watch

Fitch Ratings said it placed Mexarrend SAPI de CV’s long-term local and foreign currency issuer default ratings, global senior unsecured debt rating, long-term national ratings and local senior long-term unsecured notes on rating watch negative.

The rating watch reflects the erosion of the company’s capital base and the breach of Fitch’s leverage sensitivity of 7x as of September, mainly driven by the registered net losses and high growth.

Mexarrend incurred extraordinary expenses driven by the unwind of the derivative instruments used for the $150 million unsecured bond partial prepayment, in addition to costs associated to the amortization of expenses related to the prepaid bond and those associated with the placement of the new bond.

Fitch said it expects to resolve the watch status around three months from now, with the outcome being heavily contingent on Fitch’s assessment on whether the tangible leverage ratio has returned or is on track to return to levels around 7x or not, and once Fitch has access to audited statements to assess accurately the effect on earnings of the recent funding strategies.

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