Nov 9 - Fitch Ratings assigns a 'B+(exp)/RR3'rating to Grupo Posadas S.A.B.
de C.V.'s (Posadas) proposed senior unsecured notes due 2017 for up to USD $225
million. The proposed notes' net proceeds will be applied to the purchase of the
USD $200 million senior notes due 2015. The expected recovery ratings are 'RR3',
which indicates good recovery prospects given default. 'RR3' rated securities
have characteristics consistent with securities historically recovering 51% -
70% of current principal and related interest.
Posadas' ratings are supported by the company's solid business position, strong
brand name and multiple hotel formats. Conversely, the ratings are tempered by a
track record of high leverage, as well as industry cyclicality. Posadas'
presence in all major urban and coastal locations in Mexico, consistent product
offering and quality brand image have resulted in occupancy levels that are
above the industry average in Mexico. The use of multiple hotel formats allows
the company to target domestic and international business travelers of different
income levels as well as tourists, diversifying its revenue base.
Posadas recently completed a successful divestiture of its South American hotel
operation for USD $275 million. From the proceeds USD $245 million are
available, mitigating refinancing concerns related to the MXN2.25 billion
'Certificados Bursatiles' issuance due April 2013. The divested South American
operations accounted for approximately 19% of last year EBITDA and historically
have accounted for approximately 14%. Excluding South American operations, a
one-time charge related to a write-down of accounts receivable at the vacation
club in the fourth quarter of 2011 and assuming proceeds from the divestiture
are used to pay debt, total adjusted debt to EBITDAR and total debt to EBITDA
should improve to 4.8 times (x) and 4.1x, respectively, from previous levels of
Furthermore, cash flow contribution to consolidated EBITDA from the Vacation
Club operation should increase in the short term as a result of the divestiture
of South America; however, cash flow contribution from the hotel operations
should become increasingly important in the medium term as new openings and key
performance indicators approach levels registered prior to 2008. Going forward,
Posadas' strategy will be centered on operating and providing services to hotels
as opposed to owning the properties. New openings should continue for all
brands, mainly Fiesta Inn and One, under managed and leased formats. This
strategy of openings reduces capex and supports free cash flow generation.
Fitch currently rates Posadas as follows:
--Local currency Issuer Default Rating (IDR) 'B';
--Foreign currency IDR 'B';
--National scale rating 'BB+(mex)';
--USD200 million senior notes due 2015 'B+/RR3';
--MXN2.25 billion Certificados Bursatiles issuance 'Posadas08' due 2013
The Rating Outlook is Stable.