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Fitch: Hypermarcas' Asset Sale is Credit Positive
December 27, 2016 / 6:23 PM / in 10 months

Fitch: Hypermarcas' Asset Sale is Credit Positive

(The following statement was released by the rating agency) SAO PAULO, December 27 (Fitch) Hypermarcas' sale of its Disposable Products Business to Ontex Group NV (Ontex) is considered credit positive by Fitch Ratings, as it strengthens the company's already deleveraged capital structure. Depending on the use of proceeds, this transaction could strengthen Hypermarcas' ability to generate more robust cash flows from operations (CFFO) and free cash flows (FCF), which continue to be key credit factors for an investment grade rating level. Fitch rates Hypermarcas with Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) of 'BB+' and Long-Term National Scale Rating of 'AA+(bra)'. The Outlook for the Foreign Currency IDR is Negative while to the Local Currency IDR is Positive. According to the announcement, on Dec. 22, 2016, Ontex will pay BRL1 billion in cash at the conclusion of the deal, expected to occur during the first quarter of 2017. The conclusion of the deal is subject to the fulfillment of certain conditions customary in this type of transaction and does not depend on approval by antitrust regulators. The transaction also strengthens Hypermarcas' business profile, which increases its exposure to the more profitable and resilient pharmaceutical sector, providing higher cash flow stability in the long term. On a pro forma basis, including BRL1 billion in funds as part of the deal, Hypermarcas should report net cash of approximately BRL1.7 billion, based on Oct. 4, 2016 figures. Hypermarcas' credit metrics are strong for its ratings, but Fitch continues to monitor the recompany's capacity to strengthen its cash flow generation and strategy regarding commercial policies, working capital requirements, level of dividend payouts and merger and acquisition (M&A) activities. In the last 12 months ended Sept. 30, 2016, the Disposable Products Business generated revenues of BRL1.2 billion. With this deal, Hypermarcas completes the restructuring of its portfolio with the aim of becoming a pure pharmaceutical company. Contact: Primary Analyst Debora Jalles Director +1-312-606-2338 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Renato Donatti Associate Director +55 11 4504-2215 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com. Additional information is available at 'www.fitchratings.com'. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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