Pesquera Exalmar Upgraded To 'B' From 'B-' And Off Watch On Debt Refinancing And Improved Credit Metrics, Outlook Stable

  • During the first quarter of 2019, Peru-based fishing company Pesquera Exalmar S.A.A. (Exalmar) refinanced its senior unsecured notes for $109 million due 2020 and posted stronger operating and financial performance due to higher-than-expected fishing quotas that have strengthened its capital structure and liquidity position.
  • On April 15, 2019, S&P Global Ratings raised its global scale issuer credit and issue-level ratings on Exalmar to 'B' from 'B-' and removed them from CreditWatch, where we placed them with positive implications on Jan. 16, 2019.
  • The stable outlook reflects our view that Exalmar will continue to deliver a solid operating and financial performance and cash flow generation thanks to favorable fishing conditions, higher purchases from third parties, and some operating efficiencies. We expect an improvement in Exalmar's liquidity and leverage metrics with a debt to EBITDA and EBITDA interest coverage below 4.0x and above 3.0x, respectively, in the next 12 months.
MEXICO CITY (S&P Global Ratings) April 15, 2019—S&P Gloal Ratings took rating actions described above.
After refinancing its senior unsecured notes for $109 million due 2020, Exalmar has improved sharply its financial risk profile, capital structure, and liquidity position with a debt maturity profile above 3.5 years on a pro forma basis. Exalmar used a $110 million five-year syndicated loan and cash on hand to refinance the senior unsecured notes due 2020 and repay a $19 million syndicated loan. We believe the new syndicated loan will help the company reduce its debt at a faster pace than we had previously expected, given the manageable amortizations that the company would face for this loan.
The upgrade also reflects the company's better-than-expected operating and financial performance during the past 12 months due to a significant recovery in the fishing quotas in Peru since 2017 and higher purchases from third parties. The company posted EBITDA margins of around 35%, a debt-to-EBITDA ratio of 3.0x, and an EBITDA interest coverage of 4.4x as of Dec. 31, 2018. Given the refinancing and a robust EBITDA, we forecast these metrics below 4.0x and above 3.0x, respectively, in the next 12 months.
Our rating on Exalmar continues to reflect its vulnerability to external factors such as weather conditions, the start of fishing seasons, and the quota approval process by Peruvian authorities. In addition, given that Exalmar has a limited scale of operations and is heavily dependent on production volumes along the Peruvian coast, we believe the company has limited flexibility to withstand adverse dynamics beyond its control that could impair its performance. Exalmar is the third-largest producer of fishmeal and fish oil in Peru, with a 15% participation of the total biomass determined by the Institute of the Peruvian Sea (IMARPE); comprised of an anchovy extraction quota of 7.77% and third-party share of 7.23%. The company's current processing capacity and ability to buy third-party catch have increased its production, revenue, and EBITDA, strengthening its profitability in the past few quarters. We expect the company's EBITDA margins to remain between 25% and 30% in the next 12 months.
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