Fitch: BRMalls' Stable Operational Performance & Net Leverage below 4x for 2016-2017
Fitch Ratings expects BR Malls Participacoes S.A. (BR Malls) to reach moderate annual revenue growth rates during 2015 - 2016 in the 4% - 7% range. This view incorporates the company's current revenues trend in the context of Brazil's current macro business environment. BR Malls' net revenue grew 5% during first-half 2015 from 2014's same period.
BRMalls is expected to maintain healthy occupancy rates of around 97% while late payments should remain at manageable levels in the 3% to 5% range. Despite some weakness in tenant sales and same-store sales, EBITDA margins are anticipated to remain stable around 80%. During latest 12 months (LTM) June 30, 2015, EBITDA was BRL1.1 billion, flat when compared with LTM June 2014 period. Fitch expects BR Malls' annual EBITDA to be around BRL1.25 billion during 2015 - 2017.
The company's capital intensity ratio, measured as total capex to revenue ratio was 89%, 53%; and 48% in 2012, 2013 and 2014, respectively. Fitch expects this ratio to remain in the 20% to 30% range during 2015 - 2017. This expectation is considering BR Malls plans to add approximately 85,000 m2 in owned GLA through expansion and developments during this period. The majority of the newly owned GLA will be added in 2017 when the developments of Shopping Estacao Cuibaba and Catuai Shopping Cascavel start operations.
The company's net leverage is forecasted to trend to levels below 4x toward 2016 - 2017. No additional debt is anticipated during this period. The company's total debt as of June 30, 2015, was BRL5.6 billion, which includes BRL2.3 billion in public debt. The company's U.S. dollar-denominated debt - perpetual notes - represents approximately 21% of the company's total debt. BR Malls' net leverage has been stable around 4.5x during the last five years.
The company is expected to maintain good levels of liquidity considering its manageable debt payment maturity schedule over the next three years, expected levels of available cash, stable interest coverage ratio, unencumbered asset level, and credit access. The company's interest coverage was 2x during the last 12-month period ended on June 30, 2015 (LTM June 2015), and it is expected to remain stable at this level during 2015 - 2016. During the month of October 2015, the company executed the sale of three assets: Center Shopping Rio; West Shopping; and Shopping Paralela, for a total amount of BRL318 million, representing around 3% of its current GLA. Considering this asset sale, the company's liquidity position is estimated to improve to closed 2015 at levels around BRL7752 million (BRL520 million as of June 30, 2015) by the end of 2015.
Fitch currently rates BRMALLS Participacoes S.A. (BRMALLS) as
--Foreign currency Issuer Default Rating (IDR) at 'BB+';
--Local currency IDR 'BB+';
--Long-term national scale rating 'AA (bra)';
--BRL400 million local debentures, first and second tranches due in 2017 and 2019, respectively 'AA (bra)';
--BRL400 million local debentures due in 2016 'AA (bra)';
--BRL270 million local debentures due in 2016 'AA (bra)'.
BR Malls International Finance Limited (Finco):
--USD405 million perpetual notes 'BB+'.
The Rating Outlook is Positive.
Additional information is available at 'www.fitchratings.com'.
Jose Vertiz, +1-212-908-0641
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
Alyssa Castelli, +1-212-908-0540