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TEXT-Fitch revises Grupo ACP Inversiones outlook
March 14, 2012 / 8:18 PM / 6 years ago

TEXT-Fitch revises Grupo ACP Inversiones outlook

(The following statement was released by the rating agency)

March 14 - Fitch Ratings has today affirmed Grupo ACP Inversiones y Desarrollo (ACP) Issuer Default Rating (IDR) at ‘BB-’ and revised the Rating Outlook to Positive from Stable. A complete list of rating actions is included at the end of this press release. Fitch revised ACP’s Outlook to Positive from Stable based on the company’s sustained performance, sound growth prospects for its core subsidiaries, and the expected stabilization of ACP’s leverage underpinned by higher expected profits. ACP’s ratings could be upgraded if it maintains leverage within reasonable levels and if its operating companies (in particular Mibanco) are able to maintain an adequate performance while continuing to show sound asset quality, improved profitability and a solid capital/reserves cushion. ACP’s ratings could be downgraded if the performance of its key operating companies deteriorates severely due to weaker economic conditions that would impair their profitability and revenue stream and/or if the holding company’s leverage increases. ACP’s ratings reflect its long established expertise in microcredit, strong operational performance, consistent expansion strategy, sound growth prospects and deft financial planning. Fitch’s assessment of ACP’s creditworthiness is tempered by its increased leverage, lower profitability and heightened competition. ACP has been active in microcredit since 1969. It created Peru’s largest microcredit bank (Mibanco) and invested in several microcredit ventures throughout the region, amassing a significant expertise and in-depth knowledge of the economic environment and microcredit business in the region. ACP’s core holding, Mibanco, maintains a sound performance based on loan growth, resilient margins and strong asset quality. The bank’s prospects remain good, in line with the Peruvian economy while other investments consistently contribute to ACP’s dividend stream. Leveraging its expertise in microfinance, ACP has gradually expanded through the region and diversified its business portfolio with financial and related business services. A cautious yet determined approach to growth and its proven expertise in its segment, allow ACP to confidently face the challenges of growing abroad. ACP’s investments across the region and the aforementioned strength in its core market, coupled with the sound economic environment throughout the region and relatively low penetration in its strategic markets (Peru, Mexico and Brazil) bode well for the group’s growth in the medium term. Deft financial planning both at the operating level and at the holding company provide flexibility in terms of investment, financing and cash flow management. As the group raised funding in international markets, its leverage increased. Double leverage has increased from 82% to a still moderate 122% (129% including the minority position in BancoSol and other minor entities) and the same ratio should continue to increase once a planned debt is issued, but it is not expected to be higher than 145%. Cash flow projections show adequate debt service coverage, albeit dependent on the improved expected performance of key operating companies and a new planned debt in 2012. Even when the group’s financial profile will continue to change in the short term, it is also expected that investments increase their contribution to the holding company’s revenues (and equity) as they mature. ACP’s higher funding cost and extraordinary operating expenses resulted in a significant weakening in profitability ratios, the lowest level reported by the group over the past five years. Future revenue growth will depend on the dividend stream from Mibanco and other key ACP subsidiaries, which is at lest expected to remain stable given the positive economic background. Overall profitability could still suffer in the short run but should improve later on. ACP is a non-for profit civil association active in microcredit throughout the region. It controls Mibanco, Peru’s largest microfinance bank and has several related investments in Peru and seven countries in the region. Fitch affirms and revises the Rating Outlook on ACP as follows: --Long-term foreign currency IDR at ‘BB-'; Outlook to Positive from Stable; --Short-term foreign currency IDR at ‘B’; --Long-term local currency IDR at ‘BB-'; Outlook to Positive from Stable; --Short-term local currency IDR at ‘B’; --Viability Rating at ‘bb-'; --Support Rating at ‘5’; --Support Rating Floor at ‘NF’. (Caryn Trokie, New York Ratings Unit)

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