TEXT-S&P rates Grupo KUO notes 'BB'
Nov 20 - Standard & Poor's Ratings Services assigned today its 'BB' senior unsecured debt rating to Grupo KUO S.A.B. de C.V.'s (KUO; BB/Stable/--) proposed $250 million notes due 2022. At the same time, we assigned a recovery rating of '3' to the notes, indicating our expectation of meaningful (50% to 70%) recovery in the event of default. The notes will be denominated in dollars and are expected to be issued in December 2012. The notes will benefit from unconditional guarantee from KUO's main operating subsidiaries and will rank pari passu in right of payment to all existing senior debt. The company will use proceeds to refinance existing senior unsecured notes due 2017 for the same amount, improving the average debt life to about seven years from about five. Our 'BB' corporate rating on KUO reflects our assessment of the company's business risk profile as "fair" and its financial risk profile as significant. In our view, the ratings are constrained by the single-digit operating margins, the cyclicality in some of its core businesses, particularly chemicals and automotive, foreign-exchange fluctuations, and its exposure to the volatility of its raw materials prices. Those factors are offset by the company's strong market shares in its businesses, improved product and geographic diversification through acquisitions and a comfortable debt maturity schedule. RELATED CRITERIA AND RESEARCH -- Grupo KUO, S.A.B. de C.V. 'BB' Global Scale, 'mxA' National Corporate Credit Ratings Affirmed; Outlook Remains Stable, June 5, 2012. -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008. RATINGS LIST Grupo KUO S.A.B. de C.V. Corporate credit rating BB/Stable/-- Rating Assigned Grupo KUO S.A.B. de C.V. $250 million notes due 2022 BB Recovery rating 3 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.