ISA, Nutresa Win Positive Bond Ratings from Fitch
Medellin-based electric power transmission giant ISA and Medellin-based multinational foods producer Grupo Nutresa both recently won debt-ratings upgrades from Wall Street bond rater Fitch Ratings.
According to Fitch, ISA’s “issuer default ratings” (IDRs) have been boosted to “BBB+,” instead of the former “BBB” rating. The rating outlook remains “stable” while ISA’s senior unsecured local bond carries an “AAA(col)” rating and its commercial paper carries an “F1+(col)” rating.
“The rating actions consider ISA’s track record of strong credit metrics, which positively compares with other companies in the power transmission segment within the region,” according to Fitch.
“ISA’s ratings reflect the low business risk profile of the company, which is a characteristic of the power transmission business. The ratings incorporate the geographic diversification of its revenues source, which along with the high predictability of cash flows from operations translate into a strong financial profile,” according to Fitch.
During 2015, around 72% of ISA’s total revenues and 68% of its earnings before interest, taxes, depreciation and amortization (EBITDA) “came from its energy transmission business units in Colombia, Brazil, Peru and Bolivia, which performs as a natural monopoly and it is not exposed to demand risk. The company maintains its lead position in energy transmission in South America, with 41,885 kilomters of circuits in operation. In Colombia, ISA controls 77.2% of the national transmission system and it is the only operator with national coverage,” according to Fitch.
ISA’s ratings “consider the reset of the regulatory remuneration applicable to transmission business in Colombia. In February 2016, the Colombian energy regulator (CREG) issued a new regulatory proposal to review the remuneration mechanism of the transmission activity in order to have comments from the market participants.
“The proposal could imply some pressures in the profitability of the power transmission segment, as well as it would encourage more capex from market participants to maintain the value of the regulatory asset base.
“Fitch considers the regulatory risk as low, given that regulatory entities in Colombia have provided a fair and balanced framework for both companies and consumers. In addition, ISA’s diversified sources of revenues reflect in an adequate resilience to withstand some adverse scenarios,” according to Fitch.
Meanwhile, Fitch also affirmed its “AAA(col)” rating for Grupo Nutresa’s ordinary bonds and a “stable” perspective, according to the agency.
“The decision to affirm the rating reflects the solid competitive position of the company in its relevant markets, its growing geographic diversification in countries with a favorable operational environment and solid credit profile, characterized by a moderate level of leverage and a robust generation of free cash flow throughout the economic cycle,” according to Fitch.
“In the Colombian food industry, Grupo Nutresa maintains a robust competitive position, a country that concentrated 62% of its revenue during 2014. The company is leader, with more than 50% of the market share, in segments such as cold cuts, coffee, chocolate and biscuits, which, together, represented 73% of the Grupo Nutresa consolidated EBITDA.
“Grupo Nutresa’s strong business position is based on the strength of its leading brands, its innovation capability, and its extensive distribution system, which allows it to serve more than 360,000 clients in Colombia, and more than 1 million internationally. Fitch expects that Grupo Nutresa’s organic growth in Colombia to maintain a dynamic positive growth, supported by the still resilient domestic demand and the position of leadership in the markets in which it operates,” according to the agency.