OREANDA-NEWS. September 16, 2015. Fitch Ratings has affirmed Corporacion Lindley S.A.'s (Lindley) Issuer Default Ratings (IDRs) and its senior unsecured notes at 'BBB-'. In addition, the Rating Outlook has been revised to Positive from Stable. A full list of rating actions follows at the end of this press release.

Lindley's ratings reflect the announcement on September 10 that Arca Continental S.A.B. de C.V. (AC, 'AAA(mex)'; Outlook Stable) acquired a 53% controlling stake in Lindley from various members of the Lindley family for USD760 million. AC is the second largest Coca-Cola bottler in Latin America and has operations in Mexico, Ecuador, Argentina and the U.S. The integrated entity will have revenues of about USD5 billion and EBITDA of USD1 billion, making it one of the largest bottlers in the global Coca-Cola system. The alliance with Lindley provides AC with a Peruvian presence.

KEY RATING DRIVERS

Positive Outlook Reflects Acquisition:
AC acquired a 53% controlling stake in Lindley from various members of the Lindley family for USD760 million. The Lindleys have agreed to purchase 64 million shares of AC for USD400 million once the capital increase is approved by the regulators and shareholders. In addition, the Lindleys will purchase about USD137 million in non-core real estate assets from Corporacion Lindley.

Sole Peruvian Inca/Coca-Cola Bottler:
Lindley's ratings reflect its strong business profile and 70% market share of Peru's carbonated soft-drinks market. Inca Kola is an iconic brand and the leading soft drink of the historically non-Coke Peruvian market; it is about 50% of Lindley's carbonated soft drinks sales volume.

Coca-Cola's Implied Support
The company's local currency Issuer Default Rating (IDR) is one notch above its stand-alone credit profile as a result of the operational and strategic ties between Lindley and The Coca-Cola Company (TCCC, 'A+'; Outlook Stable). TCCC continues to hold 38.5% of Lindley's equity after Arca Continental's acquisition of the Lindley family's shares (about 53%). TCCC also provides financial oversight by appointing Lindley's CFO. While TCCC does not provide direct financial support to Lindley, there have been times when TCCC has stepped in to help bottlers within the Coke system.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Lindley include:
--Revenue growth in line with 2014;
--EBITDA margin improving to about 18% by 2018;
--Asset sales collections averaging USD35 million per year;
--Capex in line with company guidance, declining to 7% of sales by 2018.

RATING SENSITIVITIES

A positive rating action could occur if Lindley is able to lower its net leverage to below 2.5x on a sustained basis. This would require the completion of the asset sales by Lindley to the Lindley family, as well as continued operating cash flow improvements.

The Rating Outlook would likely be revised to Stable if the company fails to complete the assets sales to the Lindley family.

LIQUIDITY

Fitch believes Lindley has adequate liquidity to support its financial needs. In 2015 the company will collect 70% of a USD35 million non-core asset sale closed in 2014. As of June 30, 2015, the company had USD19 million of cash and marketable securities. This compares with USD26 million of short-term debt.

Fitch has affirmed the following ratings:

Corporacion Lindley S.A.
--Foreign currency IDR at 'BBB-';
--Local currency long-term IDR at 'BBB-';
--Senior unsecured notes at 'BBB-'.

The Rating Outlook has been revised to Positive from Stable.