Fitch Affirms IRSA's Notes at 'B/RR3'; Outlook Negative

Fitch Ratings has affirmed the following ratings for Inversiones y Representaciones S.A. (IRSA):

--Foreign Currency Issuer Default Rating (IDR) at 'B-';

--Local Currency IDR at 'B+';

--USD150 million Senior Unsecured Notes due in 2017 at 'B/RR3';

--USD 150 million Senior Unsecured Notes due in 2020 at 'B/RR3';

The Rating Outlook is Negative.

IRSA's ratings reflect the company's exposure to Argentina's business climate and economic conditions as well as its consolidated credit profile.

KEY RATING DRIVERS

The 'RR3' recovery rating reflects good recovery prospects in the event of default. The notching above the soft cap of 'RR4' for bonds issued by Argentine corporates reflects the company's strong credit profile.

IRSA's foreign currency (FC) IDR continues to be constrained at 'B-' due to Argentina's 'B-' country ceiling. IRSA's Local Currency (LC) IDR is constrained at 'B+' by above-average risks associated with real estate development in Argentina.

Devaluation risk is also present for IRSA as most of its cash flow is denominated in Argentine pesos and a substantial part of its debt is in U.S. dollars. This is partially mitigated by IRSA's dollar-denominated asset portfolio.

The Negative Rating Outlooks for IRSA's FC and LC IDRs are in line with the Outlooks Fitch has assigned to Argentina's sovereign ratings, and reflect the high degree of uncertainty concerning the business climate and economic conditions.

IRSA's 'B+' LC IDR is supported by its strong performance and positive operating trends. IRSA has a leading position in the shopping center segment within the city of Buenos Aires through its subsidiary, Alto Palermo S.A. (APSA, 95.67% owned). The shopping centers segment accounts for about 75% of IRSA's consolidated operating EBITDA. The company is also the leader in the development and management of office buildings in Buenos Aires. The balance of IRSA's operating results is derived from three premium hotels, as well as its residential property development division.

IRSA maintains a moderate level of debt, as well as a manageable liquidity position, due to unencumbered assets and land that could be sold. IRSA's asset portfolio is strong with approximately USD715 million of book capital as of Sept. 30, 2013. This value would be higher at market value. These assets are mostly unencumbered, as secured debt represents less than 5% of total debt.

As of Sept. 30, 2013, IRSA had USD651 million of total consolidated debt (Net Debt was USD531 million), resulting in a total debt-to-EBITDA ratio of 2.7x and an EBITDA-to-interest expense ratio of 3.8x. APSA accounted for 32% of IRSA's consolidated debt. IRSA's main debt obligations are USD150 million notes maturing in 2017 and 2020. APSA also has a USD120 million note maturing in 2017. These notes do not have cross guarantees.

IRSA had USD121 million of consolidated short-term debt obligations as of Sept. 30, 2013. These figures compare with USD120 million of cash and marketable securities. IRSA is expected to meet its upcoming debt obligations with a mix of cash from operations and the rollover of existing debt.

Importantly, both IRSA and APSA own key parcels of land in strategic areas of Buenos Aires, which could be sold to improve the company's liquidity, or used for new developments.

Despite lower leverage at its subsidiary APSA, the local currency IDRs of APSA and IRSA have been linked at 'B+'. This linkage reflects factors that align the credit quality of the company, such as strong strategic ties, and the fact that APSA's upstream dividends represent a relevant part of IRSA's cash flow generation.

RATING SENSITIVITIES

The ratings are expected to be driven primarily by the development of the Argentina's business climate and economic conditions. Fitch expects that IRSA will manage its balance sheet to reach a total debt-to-EBITDA ratio of less than 3.5x.

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

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 5, 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Effective from 8 August 2012 - 5 August 2013

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814035

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Fitch Ratings
Primary Analyst
Jose Vertiz, [phone]
Director
Fitch Ratings, Inc.
One State Street Plaza,
New York, NY 10004
or
Secondary Analyst
Dan Kastholm, CFA, [phone]
Managing Director
or
Committee Chairperson
Joe Bormann, CFA, [phone]
Managing Director
or
Media Relations, New York
Elizabeth Fogerty, [phone]
[e-mail]