-- On July 13, 2012, Alpek, a parent company of Mexico-based chemical producer Petrotemex, announced a cash tender offer to purchase any and all of Petrotemex’s outstanding $275 million bond due 2014.
-- We are placing our ratings, including the ‘BB+’ global scale and ‘mxA+’ national scale corporate credit ratings, on Petrotemex on CreditWatch with positive implications.
On July 16, 2012, Standard & Poor’s Rating Services placed its ratings on Grupo Petrotemex S.A. de C.V., including the ‘BB+’ global scale and ‘mxA+’ national scale corporate credit ratings, on CreditWatch with positive implications.
The CreditWatch placement follows the announcement by Petrotemex’s parent company, Alpek S.A.B. de C.V., of a cash tender offer to purchase any and all of Petrotemex’s outstanding $275 million 144 A/Reg. S bond due 2014 with proceeds from Alpek’s recent IPO. We expect to resolve the CreditWatch during the next 90 days.
Petrotemex is offering to purchase its bond in two periods. First, between July 16, 2012, and July 27, 2012, the company will buy the bonds at market price plus a premium. Afterwards, Petrotemex will buy the bonds at market prices only until Aug. 10, 2012.
The CreditWatch listing reflects the possibility that we can raise our ratings on Petrotemex by one notch following the successful completion of the cash tender offer in full, or a combination of bonds and other debt prepayments of about $275 million.
We will resolve the CreditWatch listing once the cash tender offer or any other potential debt reduction transaction is concluded and we complete our review of Petrotemex’s financial risk profile, including our review of the company’s financial policies. In our view the proposed debt reduction will improve significantly Petrotemex’s key financial ratios, as well as it would strengthen the company’s capital structure given the planned capitalization of proceeds.
We can upgrade Petrotemex if the actual debt reduction would lead us to revise the company’s financial risk profile assessment to intermediate. This would include expectations of stronger cash-flow protection measures, such as funds from operations to total adjusted debt in excess of 40%. A lower-than-expected debt reduction, weaker-than-expected coverage metrics, and/or unexpected debt-financed acquisitions would lead us to remove the ratings from CreditWatch and affirm them.
Related Criteria And Research
-- Grupo Petrotemex, S.A. de C.V. Upgraded To ‘BB+’ Global Scale, ‘mxA+’ National Scale; Outlook Is Stable, March 16, 2012.
-- Use of CreditWatch And Outlooks, Sept. 14, 2009.
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008.
Ratings Affirmed; CreditWatch/Outlook Action
Grupo Petrotemex S.A. de C.V.
Corporate Credit Rating BB+/Watch Pos/-- BB+/Stable/--
Caval - Mexican Rating Scale mxA+/Watch Pos/-- mxA+/Stable/--
Senior Unsecured BB+/Watch Pos BB+ Recovery Rating