--Foreign currency Issuer Default Rating (IDR) 'BBB-';
--Local currency IDR 'BBB-';
--Proposed senior unsecured notes 'BBB-' (Expected rating).
The Rating Outlook is Stable.
Proceeds from the proposed issuance will be used primarily to refinance existing debt.
Intercorp Peru Ltd.'s (Intercorp) credit ratings reflect the company's diversified portfolio of operations, solid and leading market position in most of the industries in which it participates, positive medium-term outlook growth related to its core businesses; and its business strategy supported by the integration of financial, retail, and real estate networks oriented to attend growing needs of Peruvian consumers.
Intercorp's main subsidiaries are Intercorp Financial Services Inc. (IFS) and
Intercorp relies on dividends from operating subsidiaries to service its debt. The company maintains dividend control as all the dividends received by Intercorp are from majority owned or fully controlled companies. The credit ratings incorporate the structural subordination of the debt held by Intercorp versus the debt held by its operating companies, which is partially mitigated by Intercorp's diversified business portfolio, moderate leverage, and good liquidity resulting from high and stable expected interest coverage ratios and manageable debt payment schedule, with no material debt payments due during the next several years.
KEY RATING DRIVERS
Financial Services Driven Dividend Stream
The company's business position in the Peruvian financial services business is viewed as solid and sustainable, which supports expectations of continued stable dividends stream from these operations to Intercorp over the medium term. IFS is the second largest provider of consumer loans (retail loans other than mortgages) in
The rating considers the diversification and quality of Intercorp's dividends flow. During 2012 and 2013 the company received dividends of S/.334 million (
Moderate Gross Leverage
The company's financial gross leverage, measured by the total debt to received dividends ratio, is expected to remain moderate at levels around 3.5x during the 2015-2017 period. Intercorp is forecasted to generate annual levels of Funds Flow from Operations (FFO), measured as received dividends minus cash interest, cash taxes, SG&A expenses, board expenses and others, of approximately S/.300 million (
Retail Operations, Limited Dividend Generation in the Short Term
Intercorp Retail manages a leading multi-format retail operation in
The company's financial strategy considers the refinancing of its unsecured notes lowering Intercorp's financial costs and extending the average life of the financial debt. 2015 annual gross interest expenses - post refinancing - are estimated around S/.85 million. Intercorp's liquidity post refinancing is viewed as good considering the company will not face any major debt payment schedule during the next five years while interest coverage ratios are anticipated to remain high. The company interest coverage, measured as received dividends to interest expenses ratio, is forecasted in the 5x to 6x range during the 2015-2017 period. In addition, the company's liquidity is further supported by keeping investment for sale, consisting of Peruvian government bonds, with a market value of approximately
The Stable Outlook for Intercorp's ratings incorporate the view that the company will successfully execute its refinancing strategy and manage its gross financial leverage and interest coverage ratios at levels around 3.5x and 5x, respectively, during the 2015 - 2016 period.
Positive: The combination of the following future developments could lead to positive rating actions:
--Received dividends significantly above expected levels;
--Enhanced performance of the company's operating assets;
--Significant development in the company's gross financial leverage and interest coverage at levels above expectations incorporated in the ratings;
--Material improvement in the company's liquidity position expected to be sustained over the medium term;
--Upgrade in the rating of Interbank and/or increased diversification of dividend flows to the parent.
Negative: The combination of the following developments could lead to negative rating actions:
--Failure to maintain expected dividends levels;
--Material deterioration in gross financial leverage and interest coverage ratios from levels incorporated in the ratings;
--Deterioration in the company's liquidity by reducing assets available for sale or increasing short-term debt levels from current levels.
--Downgrade in the rating of Interbank and/or reductions in dividend flows to the parent.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
--'Rating Investment Holding Companies' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating Investment Holding Companies
Managing Director, Latin America Corporates
Email: [email protected]
Source: Fitch Ratings