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Masisa S.A. Ratings
Chicago, Illinois, USA, 30 June 2010 -- (BUSINESS WIRE) -- Fitch Ratings has taken the following rating actions for the ratings of Masisa S.A. (Masisa):
  • Foreign and local currency Issuer Default Ratings (IDRs) downgraded to 'BB' from 'BB+';
  • Long-term national scale ratings affirmed at 'A-(cl)';
  • National scale rating of Bond Line No. 355, No. 356, No. 439, No. 440 and No. 560 affirmed at 'A-(cl)';
  • Short-term rating affirmed at 'F1(cl)';
  • Equity rating affirmed at 'Level 2'.

The rating outlook is stable.

The rating actions reflect Masisa's continued weak credit ratios for the rating category as well as an increasingly negative operating environment in Venezuela and the risks of operating in Argentina, which more appropriately places the company in the 'BB' international rating category; the company's risk profile still remains consistent with the national scale rating of 'A-(cl)', which provides a moderately wider range of credit risk on the national scale.

The ratings also incorporate the expectation that Masisa will be able to offset some of the negative effects of the Venezuelan devaluation on its consolidated EBITDA in 2010 due to a sound recovery of Latin American markets, especially Brazil and Chile. Both markets are expected to benefit from better macroeconomics, growing demand, the start up of operations of the new MDP plant in Brazil last June 2009 and the restart of the Mapal MDF line in Chile in July 2010.

Positively, Masisa continues to take steps to de-leverage, which include the selling of standing wood. Further, Masisa is not facing significant amortization and/or refinancing risks during the year. Fitch is projecting a net debt/EBITDA under 3.5 times (x) by the end of 2010, which should gradually improve.

Venezuela's Business Environment Continues to Challenge:

After the devaluation of the Bolivar in January 2010 and the following deterioration of EBITDA in Venezuela, the government announced during April 2010 its intention to recover certain forestry plantations owned by a multinational firm that the press has identified as Masisa. To date, Masisa has not received any additional information on this matter. Currently, the Venezuelan plants and businesses are operating normally and 2010 EBITDA is projected at USD 22-26 million. Fitch will closely monitor sovereign related risks in Venezuela, which may hinder Masisa operating performance and credit metrics.

Strong Recovery to Offset Venezuela Results:

After a difficult operational environment in 2009, Masisa's EBITDA grew by 41% reaching USD 32 million during the first quarter of 2010. This positive comparison was achieved despite the temporary shutdown of its mills and a USD 3 million lower EBITDA due to the earthquake in Chile at the end of February, and the devaluation in Venezuela in January 2010, increasing from BOL 2.15/USD 1.0  to BOL 4.3/USD 1.0. Latin American markets are showing a strong economic recovery, especially in Brazil and Chile, which has helped increase in boards' sales of 111% and 7% (despite lower March sales due to the earthquake) respectively, during the first quarter of 2010 compared to the first quarter of 2009. In Brazil, Masisa has been able to place all production coming from the new MDP plant, while in Chile the reconstruction process will lead to further growth in demand. For 2010, Masisa is expecting to reach USD 180 million Recurrent EBITDA, of which Chile and Brazil should generate more than 55%, while Venezuela should generate close to 14%. Additionally, Masisa is receiving USD 23 million cash flow coming from the sale of standing wood.

Masisa Leverage High, Adequate Debt Maturity Profile:

Masisa's leverage is moderately high and is consistent with the new international rating category with total debt/EBITDA of 4.0x and net debt/EBITDA of 3.5x at 31 March 2010; total debt was USD 684 million, latest 12 months (LTM) EBITDA was USD 171 million and cash was USD 79 million. Masisa should be able to maintain net debt levels at approximately USD 620 million given its CAPEX program of USD 80 million per annum in 2010 and 2011, while maintaining a cash balance above USD 50 million. CAPEX program during this period should primarily be financed with cash flow. The CAPEX program consists primarily of the new MDP plant in Chile; total investment is USD 55 million and the remaining balance relates to maintenance CAPEX.

After implementing its 'Financial Strengthening Plan' during 2009, Masisa was able to reduce net debt by USD 52 million reaching USD 584 million as of December 2009 and refinanced short-term debt. During the first quarter of 2010, Masisa continued with its financial strategy, which will allow it to reduce debt maturities for 2010 and 2011, maintaining similar net debt levels.

Capacity Additions in Brazil and Chile:

In June 2009, Masisa's new 750.000 cubic meters MDP mill in Brazil started operations. Currently, it is operating at 60% and is expected to reach full operating capacity by 2012. The mill is expected to generate an annual EBITDA in the range of USD 30-40 million. Access to fiber is secured through a strategic alliance with an international timber fund (Hancock). In addition, Masisa is carrying out in Chile a new MDP mill with 280,000 cubic meters and USD 55 million investment. The mill should start operations in the third quarter of 2011 to achieve full capacity in 2012.


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