December 18, 2012 / 9:51 PM / in 5 years

TEXT-S&P affirms Empresas ICA SAB de CV 'BB-' rating

     -- Mexico-based construction company Empresas ICA's key financial metrics 
remain in line with our expectations for 2012.
     -- We are affirming our 'BB-' global scale and 'mxBBB+' national scale 
corporate credit rating on the company and 'B+' issue-level rating on its 
senior unsecured notes.
     -- The stable outlook reflects our expectation that the company will 
maintain an adequate liquidity and its leverage metrics to continue improving 
in line with its current financial profile.

Rating Action
On Dec. 18, 2012, Standard & Poor's Ratings Services affirmed its 'BB-' global 
scale and 'mxBBB+' national scale corporate credit rating on Empresas ICA 
S.A.B. de C.V. (ICA). At the same time, we affirmed the 'B+' issue-level 
rating and the recovery rating of '5', indicating expectation of moderate (10% 
to 30%) recovery in the event of a payment default, to the company's senior 
unsecured notes due 2017 and 2021. The outlook is stable.

The 'BB-' rating on ICA reflects our assessment of the company's "fair" 
business risk profile, "aggressive" financial risk profile, and "adequate" 

Our assessment of ICA's business risk profile as "fair" reflects the inherent 
cyclicality of the construction industry, and the geographic concentration of 
its markets. These factors are counterbalanced by the company's status as the 
largest engineering, procurement, and construction firm in Mexico, with a long 
and positive track record throughout its different business divisions. It also 
reflects the company's diversified portfolio mix with investments in large 
projects with complex designs and heavy construction, as well as participation 
in road and water concessions, and airports.

On Dec. 3, 2012, ICA announced that it will merge its homebuilding division 
ViveICA with Servicios Corporativos Javer (not rated). Following this 
transaction, we believe that ICA's business and financial risk profiles won't 
be significantly affected, as ViveICA contributed less than 5% of consolidated 
EBITDA and accounted for about 2% of the company's total debt. In our view, 
this recent sale reflects ICA's focus on the growth of its construction 
business and the expansion of operations in infrastructure development. The 
company's construction division generates 80% of revenues, and infrastructure 
unit 13%. The infrastructure division contributes 50% of EBITDA, and 
construction 48%. As of Sept. 30, 2012, the company's backlog reached 
approximately MXN42.5 billion, with two recently contracted toll road projects 
and a container port development on Mexico's west coast accounting for almost 
25% of the backlog.

Our assessment of ICA's financial risk profile as "aggressive" reflects 
limited financial flexibility associated with high leverage ratios that we 
expect to be in the 7.0x area by the end of 2012. Under our base-case 
scenario, we assume that the existing backlog will support a 15% revenue 
growth in 2013. The start of several concessions, including a couple of toll 
roads and water-related projects, will drive revenue growth. Our baseline 
forecast considers that the concessions division will maintain EBITDA margins 
close to 60%. We expect ICA's debt-to-EBITDA ratio to decline below 6.0x in 
2013 and the mid-4x area in 2014. We also expect funds from operations to 
total debt will improve rapidly to 15% by 2015 from less than 5.0% in 2012 due 
to increased cash flow generation. Our assessment on ICA's financial risk 
profile incorporates our expectations that the company's financial policy 
would limit the use of debt at the holding company level to $850 million. 
Also, our analysis of the company's capital structure excludes nonrecourse 
debt to ICA (i.e., debt from the 'ring-fenced' airport operations and the debt 
from project finance structures of concession assets). Under this assessment, 
we expect ICA's deconsolidated debt-to-EBITDA ratio to approach 6.0x by 2013.

Our senior unsecured debt rating is one notch below the corporate credit 
rating, reflecting 'moderate' recovery prospects in a default scenario, and 
the resulting structural subordination relative to other 
operating-subsidiaries' liabilities. (For our structural subordination 
methodology, see "Corporate Ratings Criteria 2008," published April 15, 2008, 
and "Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' 
Speculative-Grade Debt," published August 10, 2009, on RatingsDirect).

Based on its likely sources and uses of cash during the next 12-18 months and 
our performance expectations, ICA has  "adequate" liquidity. Other relevant 
factors in our assessment of ICA's liquidity profile include the following:

     -- ICA's sources of liquidity to exceed uses by at least 1.2x;
     -- Net sources to be positive, even if EBITDA is lower than our 
expectations by 15% during the next 12 months; and
     -- The company faces a smooth debt maturity profile for 2013-2016.

As of Sept. 30, 2012, ICA's liquidity sources include a cash balance of 
approximately MXN6.9 billion and expected FFO of more than MXN2.7 billion 
during the next 12 months. Under our base-case scenario, we have incorporated 
capital expenditures in the MXN4.0 billion area for 2013, mainly to support 
the company's backlog. We believe, however, that part of the capital 
expenditures planned in 2013 are discretionary, and expect management to pull 
back on spending if operating performance is below expectations. We expect the 
company's cash flow generation to cover most of the annual capital investment 
requirements, which shall contribute to maintaining cash balances between MXN7 
billion and MXN9 billion.

Our assessment on ICA's liquidity also reflects our view the company will be 
able to cover debt service payments at the holding company level, mainly 
supported by dividends from each of the operating business divisions 
Furthermore, the company faces a manageable debt maturity schedule, as the 
bulk of its consolidated debt is structured as project finance and debt 
maturities are matched to the underlying cash flows.

Recovery analysis
The recovery rating on ICA's senior unsecured notes is '5', indicating 
expectation of moderate (10% to 30%) recovery in the event of a payment 
default. (For the complete recovery analysis, see Standard & Poor's recovery 
report published on RatingsDirect on Aug. 28, 2012.)

The stable outlook reflects our expectation that ICA will improve its key 
financial metrics levels more commensurate with its current financial risk 
profile. In particular, we expect the company to strengthen its capital 
structure by year-end 2012 following payment of $1 billion in debt obligations 
related to the La Yesca project. Under our base-case scenario, during 2013 the 
company would not engage in large-scale projects that would require an 
increase in debt financing, but instead we expect a deleveraging trajectory 
that will drive its debt-to-EBITDA ratio to 6.0x, declining further to the 
mid-4x area by 2014, as a result of concessions coming online that would 
contribute to the improvement of cash flow generation. Also, we expect ICA to 
limit the use of debt at the holding company level to $850 million.

We could lower the ratings if ICA deviates from its current financial plans 
during 2013. For example, if the company incurs additional debt at the holding 
company level, weaker-than-expected operating performance that results in 
sluggish cash flow generation, and consequently in a leverage ratio above 6.0x 
by year-end 2013. In the medium term, we consider that an upgrade is unlikely 
due to the company's relatively high debt that limits its financial 

Related Criteria And Research
     -- Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
     -- Methodology And Assumptions: Standard & Poor's Standardizes Liquidity 
Descriptors For Global Corporate Issuers, July 2, 2010
     -- 2008 Corporate Criteria: Our Rating Process, April 15, 2008

Ratings List
Ratings Affirmed

Empresas ICA S.A.B. de C.V.
 Corporate Credit Rating
 Global Rating Scale                    BB-/Stable/--      
 Caval - Mexican Rating Scale           mxBBB+/Stable/--   
 Senior Unsecured                       B+                 
   Recovery Rating                      5                  

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at Use the Ratings search box located in the left 
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