S&P: El Puerto de Liverpool Outlook Revised To Negative From Stable On Possible Suburbia Acquisition; Ratings Affirmed
The change in the outlook reflects the deterioration that Liverpool's leveragemetrics will show once the acquisition of Mexican retail company Suburbia takes place, which is currently pending local regulatory approval that could result in a revision in our financial risk profile assessment in the next 12 to 18 months. Given that Liverpool will use its cash to fund the majority of the acquisition of Chile-based Ripley Corp. S. A. (Ripley, announced in recent weeks), it will need about MXN19 billion of additional debt to fund the Suburbia acquisition. We believe Liverpool will face significant challenges inthe next 12 to 18 months after it closes the transaction--including integration risks-- that could result in additional expenses that may hurt thecompany's profitability, especially considering Suburbia's EBITDA margin have declined in the past few years. While facing these difficultites, Liverpool will need to maintain its solid market position, despite lower expansion growth, and adequate liquidity. We believe that a rapid integration to improveSuburbia's operating performance and to help Liverpool face the related risks will be crucial for the company to support its deleveraging strategy in the next few years and to reach a debt to EBITDA ratio below 1.5x.
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