Gruma debt offering rated BBB- by Fitch

by Josh Sosland
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MONTERREY, MEXICO — Fitch Ratings has assigned the proposed $400 million debt offering of Gruma S.A.B. de C.V. a rating of BBB-. Proceeds from the bonds, which mature in 2024, will be used by the company to redeem $300 million in outstanding perpetual bonds as well as to repay existing debt. The new senior notes will rank equal to Gruma’s existing unsecured debt.

Bolstering the ratings, Fitch said, are Gruma’s “strong business position” as a leading global producer of corn flour and tortillas with operations in the Americas, Europe, Asia and Oceania. More than half the company’s business (51% of sales and 57% of EBITDA) are generated by Gruma Corp., the company’s operation in the United States and Europe.

“Additionally, Fitch positively factors into the ratings the potential growth opportunities for Gruma associated with the fast-growing Hispanic community in the U.S. and the increased popularity of tortillas in food preparation among consumers in different countries,” the agency said.

Another positive at Gruma cited by Fitch has been the reduction in leverage at a pace faster than anticipated. Reflecting “higher EBITDA generation,” Fitch said Gruma’s total debt-to-EBITDA ratio in the year ended Sept. 30 was 2 times, versus Fitch’s expectation of a 2.5 time ratio.

Debt will be further reduced by Gruma’s divestiture of flour milling operations with proceeds of $200 million, Fitch said.

While the company’s EBITDA and free cash flow outlook was described by Fitch as positive, the ratings agency said Gruma’s ratings would be at risk if good financial results fail to materialize or if the company makes debt-financed acquisitions.
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