OREANDA-NEWS. Fitch Ratings has downgraded Grupo Embotellador Atic S.A.'s (Atic) Issuer Default Ratings (IDRs) to 'B+' and Ajecorp B.V.'s senior unsecured notes to 'B+'. Fitch has also assigned the bonds a Recovery Rating of 'RR4'. A full list of rating actions follows at the end of this press release.

The downgrade reflects the negative impact of currency depreciations in the majority of markets in which Atic operates as well as the Fitch's overall negative view on economic growth in Latin America. These factors should continue to result in negative free cash flow for the company.

KEY RATING DRIVERS

Currencies Significantly Impacting Results

As of March 31, 2015, Atic had EUR47 million of cash versus EUR550 million of debt. Fitch expects Atic to generate about EURO100 million of EBITDA in 2015. Fitch anticipates that the company's operations in Colombia and Indonesia will significantly underperform 2014 due to the significant depreciation of the Colombian peso and Indonesian rupiah. The cash flow of the company's Peruvian operations, which is a key market for the company, will also suffer when measured in euros due to the weakness of the Nuevo sol. The aforementioned currencies are not expected to materially strengthen in the near term.

Negative View on Regional GDP Growth

Fitch has an overall negative view of GDP growth for the region; Atic is in the majority of these markets. The company has restructured operations in Brazil and Mexico. These business generated larges losses last year, and Fitch's projections incorporate significant improvement in the performance of these two countries. A similar strategy has been implemented in Thailand and Indonesia, where, like in the Latin American markets, economic growth has slowed and the respective currencies have fallen relative to the U.S. dollar. Fitch expects markets that have performed well, such as Central America and Ecuador, to continue to grow. Markets where Atic's product offering is more diversified and the level of currency depreciation has been less pronounced such as Peru should post some improvement.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Atic include:

--No material appreciation of the Peruvian Nuevo sol, Brazilian real, Colombian peso, Mexican peso and Indonesia rupiah from current levels;
--Little to no revenue growth in 2015 and 2016;
--EBITDA margin around 11%;
--Maintenance capex of about USD50 million;
--Negative free cash flow of around EUR30 million in 2015 falling to negative EUR10 million in 2016 and 2017.

RATING SENSITIVITIES

Atic's ratings could face downward pressure if weak volumes or further currency volatility cause a significant deterioration in credit metrics. Failure to reach breakeven EBITDA in Brazil and Mexico could also lead to a negative rating action.

A positive rating action is not likely in the near term.

LIQUIDITY

Atic's liquidity has declined to EUR47 million (USD50 million) as of March 31, 2015 from EUR55 million (USD67 million) in 2014 while its short-term debt has increased to EUR99 million from EUR89 million; total debt was EUR550 million. Net leverage was 5.7x in EUR terms during the March 31 LTM. Fitch does not expect a significant improvement in liquidity for the next 12-24 months.

Atic has working capital facilities for about USD150 million available for use. There are no major debt amortizations until its senior unsecured notes come due in 2022.

Fitch has taken the following rating actions:

Grupo Embotellador Atic S.A.
--Foreign currency IDR downgraded to 'B+' from 'BB';
--Local currency long-term IDR downgraded to 'B+' from 'BB'.

Ajecorp B.V.
--Senior unsecured notes downgraded to 'B+' from 'BB' and assigned a Recovery Rating of 'RR4'.

The Rating Outlook is Negative.