Fitch: Gildemeister's Continued 2015-2016 Negative FCF Trend to Pressure Liquidity

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings views Automotores Gildemeister S.A.'s (AG) current liquidity position as untenable. AG's negative free cash flow (FCF) is expected to continue in 2015-2016 due to its limited capacity to cover interest expenses. This trend is expected to result in lower liquidity by the end of 2016. Assuming no change in the business fundamentals and the company's capital structure, Fitch estimates AG's 2015-2016 accumulative negative FCF at around CLP 66,212 million, which represents 2.7x the company's liquidity position as of June 30, 2015.

AG is facing a challenging scenario for 2015-2016 in Chile and Peru, its main markets. Fitch's rating case assumes AG's total annual sales average in the 62,000 to 58,000 unit range in 2015-2016, which represents a 10%-20% decline over 2013-2014 levels. Fitch expects the company's revenue to drop around 10% in 2015. Fitch's rating case projects EBITDA margins around 1.5%-2% during 2015-2016. AG's 2015 EBITDA is estimated at around CLP12,465 million.

AG ended June 30, 2015 with a cash position and short-term debt of CLP24 billion (USD35 million) and CLP87 billion (USD125) million, respectively. AG's current negative FCF trend should put additional pressure on its liquidity during 2015-2016. Liquidity relies on the company's capacity to renew short-term debt with banks. The sale of AG's real estate assets, which initially was planned for the second half of 2014, has been postponed and is not included in Fitch's rating case. AG had CLP667 billion (USD993 million) in total adjusted debt at the end of June 2015. This debt consists primarily of CLP576 billion (USD825 million) of on-balance-sheet debt, including the unsecured notes due in 2021 (USD400 million) and 2023 (USD300 million), and an estimated CLP92 billion (USD131 million) of off-balance-sheet debt associated with lease obligations resulting from CLP13.1 billion (USD21 million) in rental payments during the LTM to June 2015.

Fitch currently rates Automotores Gildemeister S.A.'s (AG) as follows:

--Foreign currency Issuer Default Rating (IDR) at 'C';

--Local currency IDR at 'C';

--USD400 million unsecured senior notes due in 2021 at 'C/RR4';

--USD300 million unsecured senior notes due in 2023 at 'C/RR4'.

Additional information is available at 'www.fitchratings.com'.

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View source version on businesswire.com: http://www.businesswire.com/news/home/20151120005497/en/

Fitch Ratings
Jose Vertiz
Director
+1-212-908-0641
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Media Relations:
Alyssa Castelli, +1-212-908-0540
[email protected]

Source: Fitch Ratings

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