Fitch Ratings has assigned Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'CCC' to
The Rating Outlook is Stable.
Fitch also assigns a rating of 'CCC'/'RR4' to IRSA's new senior unsecured notes due 2028 to be issued as part of the company's proposed exchange transaction.
The 'CCC'/'RR4' rating of the existing
Fitch also withdraws IRSA PC's Long-Term Local and Foreign Currency IDRs.
Fitch has withdrawn IRSA PC's ratings due to its dissolution and the absorption of all its assets and liabilities by IRSA.
Key Rating Drivers
Exchange Offering: On
Fitch believes a successful exchange will significantly reduce IRSA's refinancing risk. Conversely, failure to execute the proposed transaction will further limit the company's ability to address its 2023 debt maturities due, in great measure, to the existing capital controls in
Weak Operating Environment Caps Ratings:
Refinancing Risk: As of
Relevant Business Position: The company is an experienced and well positioned operator maintaining 67% share of
Recovery in Malls Operations as Economy Reopens: Recovery was significant in 2021 as operations improved following the sharp decline in performance seen in 2020 as a result of pandemic-related restrictions on malls activities. Fitch expects to see a continued gradual improvement in IRSA's sales and traffic in 2022. As of 3Q22, nine-month revenues are up 37% nominally when compared to the same period for 2021. That said, a devaluation of the ARS may underscore some of these performance gains in the future.
Derivation Summary
IRSA's ratings are primarily driven by
Key Assumptions
Occupancy levels maintained at 90% and 80% for the mall and office segments, respectively, during fiscal 2022;
Recovery in revenues of 37% maintained for fiscal 2022;
Net debt to EBITDA of around 5.5x is maintained or lowered over the next 18 months;
Total unencumbered assets base of around
A successful exchange transaction with at least a 75% participation rate.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
An upgrade is unlikely but could be considered if the Argentine sovereign rating is upgraded and if the macroeconomic environment improves, clarity increases surrounding the company's ability to refinance its hard currency debt, and IRSA's liquidity position becomes stronger or the company accesses
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A significant deterioration of credit metrics to total net debt/EBITDA of 7.5x on a sustained basis;
Weakened EBITDA to Interest expense of below 1.0x;
A downgrade may occur if, in Fitch's judgment, a default of some kind appears probable or a default or default-like process has begun, which would be represented by a 'CC' or 'C' rating.
KEY RECOVERY RATING ASSUMPTIONS
The recovery performed under the following assumptions resulted in a high recovery level. However, the bonds are capped at 'RR4' for
The recovery estimate reflects a sustainable, post-reorganization Going Concern (GC) EBITDA level upon which Fitch bases the enterprise valuation. An Enterprise Value (EV) multiple of 6x EBITDA is applied to the GC EBITDA to calculate a post-reorganization EV. Fitch also assumes a 10% administrative claim.
The choice of multiple considers that similar public companies trade at EBITDA multiples in the 12x-15x range. Fitch used a multiple of 6x to estimate a value for IRSA because this company benefits from dominant market share, unique brands, higher barriers to entry, or undervalued assets. It also factors in
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Refinancing Risk Remains: Fitch views refinancing risks for IRSA remaining high during the next 18 months. The company's refinancing capacity is highly dependent on
The issuer faces debt repayments of
The issuer maintains a readily available cash of
Issuer Profile
IRSA is a premier real estate operator in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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