Elementia S.A.'s $425 Million Senior Unsecured Notes Due 2024 Rated 'BB+' (Recovery Rating: 3)

MEXICO CITY (Standard&Poor's) Nov. 20, 2014--Standard&Poor's Ratings Services assigned its 'BB+' issue-level and '3' recovery ratings to Mexico-based Elementia S.A.'s (BB+/Stable/--) $425 million 5.75% senior unsecured notes due 2024. The company will use the proceeds to partly fund the acquisition of Lafarge's cement operations in Mexico for about $180 million, refinance about $145 million of existing debt, and $75 million for general corporate purposes. Elementia and its subsidiaries jointly, severally, and unconditionally guarantee the notes. The issue-level rating is at the same level as the corporate credit rating, reflecting the recovery rating of '3', which indicates our expectation for meaningful (50% to 70%) recovery for noteholders in the event of a payment default. The corporate credit

...2024 is '##+'. The recovery rating is '3', indicating our expectation of meaningful (50% to 70%) recovery for noteholders in the event of a payment default. + Our simulated default scenario assumes a payment default in 2018, due to a sustained economic downturn in Mexico that would translate into a reduced demand and pricing pressure which in turn would result in a 46% decline in EBITDA. + We valued the company on a going-concern basis, as we believe that under a default scenario, the company would continue to have a viable business model given its diversified product portfolio. + Other key default assumptions include the factoring credit facilities for up to $125 million at default. In an event of default, the senior unsecured notes would rank pari-passu in right and order of payment with all the existing debt instruments in Elementia's current capital structure given that the guarantee provided by Elementia and its susbsidiary would eliminate any structural subordination. + To value the...

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