OREANDA-NEWS. Fitch Ratings has affirmed the ratings of Bepensa S.A. de C.V. (Bepensa) as follow:

--Long-term foreign currency Issuer Default Rating (IDR) at 'BBB';
--Long-term local currency IDR at 'BBB';
--National scale long-term rating at 'AA+(mex)'.

The Rating Outlook is Stable.

Bepensa's ratings reflect the solid business position of its main subsidiary Bepensa Bebidas, S.A. de C.V. (Bepensa Bebidas) which has a long and successful track record of profitability as a bottler operator of Coca-Cola's products in the territories of the Yucatan Peninsula and Dominican Republic. The ratings incorporate Bepensa's solid financial position with adequate leverage and manageable liquidity. Bepensa ratings also take into account the operations of its industrial and financial services businesses segments which contribute with approximately 13% and 5%, respectively, of its consolidates revenues.

The ratings are constrained by higher debt levels associated with acquisitions, competitive environment in the beverage industry, volatility in raw material costs, and changes in tax laws associated with a further increase in taxes on sugary beverages. Bepensa's credit quality is also limited by the credit risk associated with its financial services operation Financiera Bepensa S.A. de C.V. SOFOM, ENR. (Finbe; rated 'AA-(mex)' by Fitch). In Fitch's opinion, Finbe's business and financial risk profile is higher than the company's core business (beverages).

KEY RATING DRIVERS
Strong Business Position:
Bepensa's ratings reflect the solid business risk profile of its beverage business. Bepensa Bebidas has strong market share position in the territories of the Yucatan Peninsula in Mexico (Campeche, Quintana Roo, Yucatan) and Dominican Republic supported by its well diversified portfolio of leading brands and extensive beverage distribution system. Also, the company's Mexican territory possesses favorable characteristics such as young population, warm weather and the highest soft drinks consumption per capita in Mexico. Fitch incorporates into the ratings that Bepensa will maintain its leading business position in the long term.

Entrance to Alcoholic Beverages:
Fitch considers that the conclusion of the acquisition of Caribe Cooler by Bepensa, concluded in March 2015, represents a new avenue of growth for the company in the long term which provides nationwide expansion and product diversification. Caribe Cooler is a leading brand in the ready to drink alcoholic category and is highly recognized among consumers. The acquisition was financed with debt and in Fitch's opinion is manageable for its current ratings.

Recovery in Operating Results:
Fitch expects Bepensa's operating performance to improve in 2015 after weak results in Mexico's beverage business during 2014. Positive trends in the economic environment in Mexico and assimilation of excise tax on soft drinks by consumers should contribute to recover volume growth and mitigate the pressures in dollar denominated raw material costs as a result of the depreciation of the Mexican peso. Fitch projects for 2015 a revenue increase between mid to high single digits, including Caribe Cooler operations, and EBITDA margin around 16%.

Higher Leverage:
Fitch projects that Bepensa's total debt-to-EBITDA to be close to 2.5x in 2015 and around 2.0x in 2016. The projection includes the debt from the acquisition of Caribe Cooler and the expected growth in EBITDA generation. Bepensa's total debt as of March 31, 2015, was MXN5.3 billion which represented an increase of 52% when compared to 2014 year end figure. In addition, for the last 12 months as of March 31, 2015, the company's total debt-to-EBITDA and net debt-to-EBITDA were 2.8x and 2.5x, respectively. Fitch considers that current leverages ratios are in the weak range of the rating category and expects a gradual strengthening of these metrics in the following two years with internal cash flow generation or debt reduction.

Manageable Liquidity:
Fitch considers Bepensa has flexibility to face its short-term debt amortizations by managing the working capital requirements of its financial services division and capex. As of March 31, 2015, the company had cash balances of MXN622 million, annual funds from operations estimated by Fitch of MXN2 billion and short-term debt of MXN2 billion. Upcoming debt maturities in 2016, 2017 and 2018 are approximately MXN1.2 billion, MXN1.3 billion and MXN1 billion, respectively. Fitch incorporates that a high portion of its short-term debt is refinanced every year as it is associated with its financial service business.

Financial Business Limits Ratings:
Bepensa's ratings are constrained by the strong parent-subsidiary relationship between Bepensa and its fully owned subsidiary and financial arm Finbe. Fitch considers that the credit portfolio growth demands high working capital, which consequently results in negative free cash flow (FCF) and increases the company's financial risk during an adverse economic environment in Mexico. Around 31% of Bepensa's total debt as of March 31, 2015, was associated with the operations of Finbe.

KEY ASSUMPTIONS

--Consolidate compounded annual growth rate in revenues of mid-single digits for 2015-2016;
--Improvement in EBITDA margin to around 16% for 2015-2016;
--Total debt-to-EBITDA of 2.5x in 2015 and 2x in 2016;
--Capex levels between MXN550 million and MXN600 million in 2015-2016;
--No dividend payments until 2017.

RATING SENSITIVITIES

A positive rating action could be considered if Bepensa decreases its total debt-to-EBITDA to historical levels as a result of an improvement in operating results or debt reduction; consistently generates positive FCF and eliminates or decreases its linkage with Finbe.

Negative ratings actions could arise as a result of a deterioration of its operative performance in the beverage business, higher working capital requirements due to uncollectible accounts in Finbe, or debt financed acquisition, leading to a total debt-to-EBITDA above 2.5x on a sustained basis.