CHICAGO, March 27 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has
assigned a preliminary foreign currency rating of 'BBB-' (Triple-B-Minus) to
Grupo Minero Mexico's S.A. de C.V.`s (GMM) Series A Guaranteed Senior Notes
due 2008 and the Series B Guaranteed Senior Notes due 2028.
The aggregate issuance amount for both series is US$ 500 million. DCR's
'BBB-' (Triple-B-Minus) rating is an indication of timely payment of interest
and principal, or in the case of an inconvertibility event, payment of
principal within two years of the scheduled maturity date.
DCR's rating of the transaction is provisional and subject to a final
satisfactory legal review and receipt of the necessary legal opinions.
The notes have been rated above Mexico's sovereign foreign currency rating
of 'BB+' (Double-B-Plus) and below GMM's local currency rating of 'BBB'
(Triple-B) and the Secured Export Note's (SEN) rating of 'BBB' (Triple-B). DCR
believes that the structural features of these notes are commensurate to the
foreign currency rating of Mexico and the rating of the notes. The main
structural features include:
* A six-month offshore interest reserve.
* Benefit of the GMM SEN structure through a subordinated interest in
its cash flow during the time the SENs are outstanding.
* An obligation to maintain an offshore pass-through account into which
payments of a portion of the proceeds from export sales of the guarantors will
be made pursuant to irrevocable payment instructions to these customers
(during such time as Mexico is rated investment grade by at least two rating
agencies), when the SENs are no longer outstanding.
* An extended amortization schedule for the payment of principal in case
of an inconvertibility event in Mexico.
The primary risk to these notes is the continuance of an inconvertibility
event in Mexico for more than six months before the SENs are fully amortized
or another issuance of notes similar to the SENs which is senior to these
notes. DCR considers the likelihood of this risk to be consistent with the
rating assigned to the notes. GMM is the leading producer and exporter of
refined copper in Mexico. GMM's local currency rating reflects its strong
mining assets, competitive cost structure, healthy discretionary cash flow and
successful track record of operating in Mexico. GMM's liquidity is strong,
including typically high cash balances, although cash holdings could be
reduced in the event of upstreamed payments to Grupo Mexico for use in
alternative investments. GMM's volume, productivity and processing capacity
have all increased significantly since the early 1990s, when the bulk of its
assets were acquired from the Mexican government. Despite a significant
decline in the price of copper from 1996 and 1997 levels, GMM's attractive
mining properties and efficient assets allow the company to remain profitable
and generate cash at current prices. GMM's debt-to-capital ratio has been
relatively stable and has been largely discretionary as a result of the
company's large cash holdings. Proceeds from these notes will be loaned to
GMM's parent company to refinance existing indebtedness incurred to purchase
railroad assets being privatized by the Mexican government. These notes are
jointly and severally guaranteed by GMM (formerly known as Medimsa) and its
principal operating subsidiaries.
CONTACT: Rohinton Dadina, Structured Analyst, 312-368-3123, firstname.lastname@example.org or Mark Oline, Corporate Analyst, 312-368-2073, email@example.com, both of DCR; or Marco Sotomayor of DCR Mexico, 011-528-356-6880 or firstname.lastname@example.org