10:36 | New York (U.S.), Feb. 20.
Moody's Investors Service has affirmed the Ba2 senior unsecured debt rating of Intercorp Peru Ltd.'s (Intercorp), and its outlook remains positive.
The action follows the change in the outlook of InRetail Consumer, a subsidiary of Intercorp, to negative on February 5 (see press release "Moody's changes InRetail Consumer's outlook to negative; affirms Ba1 ratings").
The affirmation of
Intercorp's Ba2 rating with a positive outlook - despite the change in InRetail Consumer's outlook to negative- considers the relatively limited relevance of InRetail Consumer to the holding company's consolidated net earnings, dividend receipts, and total assets.
In addition, the positive outlook considers the positive outlook on the ratings of the holding group's main contributor of dividends and earnings, Banco Internacional del Perú-Interbank (Baa2/Baa2 positive, baa3).
The recent change in InRetail Consumer's (Ba1) outlook to negative followed the announcement that its drugstore subsidiary Inkafarma (unrated) was acquiring Quicorp S.A. (unrated).
The acquisition was funded through a combination of (i) a portion of a new US$1 billion 1-year bridge loan the proceeds of which will be used do partially fund Quicorp's acquisition and to perform liability management at InRetail and Quicorp, and (ii) a US$150 million equity contribution from group of private investors led by Nexus Group, which will provide them a 13% ownership stake of the consolidated pharma operations.
The acquisition will increase InRetail's share of Peru's modern drugstore chain market to 80% and boost its international expansion strategy and it will likely increase the dividend contribution from the retail business in the long term, helping to improve Intercorp's revenue and dividend diversification. However, the financing of the deal will also considerably increase InRetail's leverage and
Moody's anticipates that the deleveraging process will be gradual.
While Intercorp's double leverage ratio, which equaled an estimated 114% as of December 2017, will not be affected by the transaction because the debt is being raised at the level of a subsidiary,
Moody's nevertheless views the reliance on debt and minority investors to finance the transaction as credit negative for the holding company.
However, InRetail's S/44 million in dividend payments to Intercorp in 2017 constituted just 11% of the holding company's total dividend receipts; this was the first time that it had made dividend contributions to its parent.
Even if dividends from InRetail fall back to zero in 2018 following the acquisition, dividends from Intercorp's other subsidiaries in 2017 would be sufficient to cover its interest payments by 3.7 times.
While the acquisition will increase InRetail's assets by 40% and its net revenues by 61%, without considering synergies,
Moody's estimates that InRetail will account for just 16% of Intercorp's total assets and 17% of its net revenues on a
pro-forma basis following the acquisition, up from 10% and 14% respectively in 2017.
In contrast, Interbank contributed 61% of Intercorp's total dividend receipts in 2017. Peru's fourth-largest bank, Interbank has a strong focus on retail lending. Even after the merger, Interbank will account for 69.4% of Intercorp's total assets and 55% of its net revenues.
Intercorp's remaining dividends primarily derive from Inteligo, a private banking and wealth management operation and Interseguro, an important player in life insurance and annuities, which contributed 22% and 6.5% of the holding company's dividends respectively in 2017.
Despite moderate double leverage, Intercorp's rating is positioned two notches below the baa3 baseline credit assessment of Interbank to capture potential risks related to the holding company's aggressive acquisitive expansion strategy.
In addition to Quicorp S.A., last year Intercorp purchased Seguros Sura S.A. and Hipotecaria Sura Empresa Administradora Hipotecaria S.A., through its subsidiary Intercorp Financial Services Inc. to strengthen the holding group's position in the annuities and individual life insurance market, financing the acquisition with a US$270 million senior debt.
The rating also considers the potential that the holding company could be called upon to provide financial support to some of its non-banking subsidiaries at some point in the future, as well as the structural subordination of Intercorp to the bank and its other operating subsidiaries.
Interbank's baseline credit assessment reflects the bank's continued very strong earning generation, its good capital base, strong asset quality, ample access to granular low-cost deposit funding, and substantial liquid assets.
These credit strengths offset capital levels that remain moderate despite recent improvements. Its positive reflects outlook
Moody's view that the bank's financial performance is likely to remain strong despite indications of rising asset risks that may pressure profitability going forward, and that the improvements in the bank's capital will be sustained even as loan growth, and hence capital consumption resumes.
As a holding company, Intercorp's rating does not incorporate any government support, unlike Interbank's Baa2 deposit rating, which benefits from one notch of ratings uplift to reflect the moderate likelihood that the government will provide financial support to the bank in an event of stress.
Moody's does not believe that any support provided to the bank will extend to the holding company.
Intercorp has assets of US$19.5 billion, net income of US$145.7 million, and equity of US$2.9 billion as of September 2017 on a consolidated basis.
Information provided by
Moody's Investors Service.
(END) NDP/MVB
Publicado: 20/2/2018