Fitch Downgrades Automotores Gildemeister S.A.'s IDR to 'C'

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded the ratings of Automotores Gildemeister S.A.'s (AG) as follows:

--Foreign currency Issuer Default Rating (IDR) to 'C' from 'CCC';

--Local currency IDR to 'C' from 'CCC';

--USD400 million unsecured senior notes due in 2021 to 'C/RR4' from 'CCC/RR4';

--USD300 million unsecured senior notes due in 2023 to 'C/RR4' from 'CCC/RR4'.

The ratings downgrade follows AG proposed exchange offering. According to Fitch's methodology, the proposed offering imposes a material reduction in terms vis-a-vis the original terms of the 2021 and 2023 notes. The successful completion of the exchange would result in the IDRs being downgraded to Restricted Default 'RD'. Shortly after the distressed debt exchange is completed, the IDRs would be re-rated and raised to a performing level, which usually is still in the low speculative grade.

The offering proposes to voluntarily exchange the 2021 notes and the 2023 notes for up to US$359.5 million of senior secured 9% notes due in 2020 and the Unidad de Fomento equivalent of up to US$330 million of subordinated unsecured payment certificates due in 2035. The Chilean peso denominated subordinated certificates will not bear interest.

The offering is contingent upon the consent of more than 50% of the holders of each note. The exchange offer and solicitation expires on May 1, 2015. If successful, the holders of the notes that do not participate in the exchange will be subordinated to the new notes and certain covenants will be removed.

The 'C' ratings reflect extreme cash flow pressure that the AG remains under due to weakness in its key markets. The exchange offer would reduce the company's interest expense to approximately US$30 million from US$65 million per year. If the company's exchange is unsuccessful, debt service would be contingent upon extraordinary measures, as Fitch believes the company's cash flow will continue to remain weak in 2015.

KEY RATING DRIVERS

The exchange offer launched on April 6, 2015, constitutes a distressed debt exchange under Fitch's criteria, because investors face a reduction in terms and the restructuring is conducted in order to avoid a traditional payment default. Fitch considers alternative options to be limited.

RATING SENSITIVITIES

The completion of the proposed exchange offer will lead to a downgrade of the Long-term IDRs to 'RD'. A Positive rating action may follow the implementation of an alternative capital structure arising out of the restructuring process.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982730

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Jose Vertiz, +1-212-908-0641
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Rodolfo Schmauk, +562-24993341
Associate Director
or
Committee Chairperson
Joseph Bormann, +1-312-368-3349
Managing Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526
[email protected]

Source: Fitch Ratings

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