Fitch Ratings has upgraded the following ratings of Cerveceria y Malteria Quilmes S.A.I.C.A. y G. (CMQ):
--Foreign Currency IDR to 'BB+' from 'BB-';
--Local Currency IDR to 'BB+' from 'BB-';
--Senior unsecured notes due in 2012 to 'BB+' from 'BB-'
The Rating Outlook for CMQ is Stable.
CMQ is the largest brewer in Argentina with an estimated 76% market share. The company also has a strong presence within the country in soft drink, juices and water. CMQ is a wholly owned subsidiary of Quilmes International Bermuda Ltd, (QIB) which in turn is 99.9% owned by Companhia de Bebidas das Americas (Ambev). The upgrades of CMQ to 'BB+' follow Fitch's upgrades of Ambev to 'A-'. The rating of CMQ is now three notches higher than the Argentina country ceiling of 'B+'.
Although Ambev does not guarantee the debt of QIB and its subsidiaries, including CMQ, Fitch believes that it is likely that Ambev would help CMQ pay its debt in the event of the imposition of transfer and convertibility (T&C) restrictions by the Argentine government to avoid the negative externality on the cost of Ambev's debt that would result if one of its key subsidiaries defaults. Fitch also believes QIB would use some of the cash it generates in its subsidiaries in Bolivia, Paraguay and Uruguay to help CMQ repay debt in the event of T&C restrictions.
CMQ continues to perform well. For the fiscal year ended June 30, 2010, CMQ generated USD 414 million of EBITDA. With only USD 147 million of total debt, leverage was low at 0.4 times (x). Liquidity is not an issue. The company had USD40 million of cash and only USD115 million of short term debt.
Ambev generated BRL 11.8 billion (USD6.7 billion) of EBITDA during 2010, a 13% increase from 2009. During this time period, Ambev's funds from operations (FFO) grew by 17% to BRL10.5 billion (USD6.0 billion), while its cash flow from operations (CFO) increased by 16% to BRL10.1 billion (USD5.7 billion). Free cash flow after dividends and capital expenditures was strong at BRL2.9 billion (USD1.6 billion). As of Dec. 31, 2010, Ambev had a net cash position with BRL7.0 billion of cash and market securities and BRL6.8 billion of total debt.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 13, 2010);
--'Parent Subsidiary Rating Linkage' (July 14, 2010);
--'National Ratings - Methodology Update' (Jan. 19, 2011);
--'Rating Corporates Above the Country Ceiling' (Jan. 5, 2011).
Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646
Parent and Subsidiary Rating Linkage Criteria Report
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=534826
National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885
Rating Corporates Above the Country Ceiling
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=594985
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