Corporates - Fitch Ratings Chile
Transcription
Corporates - Fitch Ratings Chile
Latin America High Yield Comprehensive Analysis of ‘B+’ Issuers and Below Volume IV 2012–2013 Corporates Table of Contents Executive Summary .................................................. 1 Grupo Famsa, S.A.B. de C.V. ................................... 127 Latin America Non-Financial Institutions Corporate Financial Statistics ................................................ 11 Grupo Posadas, S.A. de C.V. ................................... 132 AES Andres Dominicana, Ltd. .................................. 14 Grupo Senda Autotransporte, S.A. de C.V. (Grupo Senda) ...................................................... 138 Alto Palermo S.A. (APSA) ........................................ 19 Industrias Metalurgicas Pescarmona S.A. (IMPSA) ... 144 Arcor S.A.I.C. ............................................................ 25 Inversiones y Representaciones S.A. ....................... 150 Arendal, S. de R.L. de C.V. ...................................... 31 Maestro Peru S.A. (Maestro) .................................... 156 Axtel, S.A.B. de C.V.................................................. 33 Marfrig Alimentos S.A. .............................................. 160 Bio-PAPPEL, S.A.B. de C.V. .................................... 39 Minerva S.A. ............................................................. 165 Cablevision S.A. ....................................................... 45 OAS S.A. .................................................................. 170 CAP Limited .............................................................. 51 OGX Petroleo e Gas Participações S.A.................... 180 Capex S.A. ............................................................... 56 Pan American Energy LLC ....................................... 185 Ceagro Agricola S.A. ................................................ 62 Petroleos de Venezuela S.A. (PDVSA) .................... 189 Celulosa Argentina Ltda. .......................................... 67 Rede Energia S.A. .................................................... 193 CEMEX, S.A.B. de C.V. ............................................ 71 Rodopa Industria e Comercio de Alimentos Ltda. .... 199 Cimento Tupi S.A...................................................... 77 SANLUIS Rassini S.A. de C.V.. ................................ 203 CLISA Compania Latinoamericana de Infraestructura y Servicios ..................................... 82 Servicios Corporativos Javer, S.A.P.I. de C.V. ......... 207 Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. (Transener)..................... 86 Sifco S.A. .................................................................. 216 Corporacion Electrica Nacional S.A. (CORPOELEC) .............................................. 92 Corporacion Pesquera Inca SAC .............................. 95 Cresud S.A.C.I.F. y A. .............................................. 100 Digicel Group Limited ............................................... 106 Empresa Generadora de Electricidad Haina, S.A. .... 111 Empresa Generadora de Electricidad Itabo, S.A. ..... 116 Gol Linhas Aereas Inteligentes S.A. ......................... 121 Latin America High Yield November 8, 2012 Sidetur (Siderurgica del Turbio, S.A.) ....................... 213 Telecom Argentina S.A. ............................................ 221 Transportadora de Gas del Norte S.A. (TGN) .......... 225 Transportadora de Gas del Sur S.A. (TGS) .............. 233 Urbi Desarrollos Urbanos, S.A. B. de C.V. ............... 238 Virgolino de Oliveira S.A. Açúcar e Álcool ................ 243 WPE International Cooperatief (WPEI) ..................... 249 YPF S.A. ................................................................... 255 Fitch Analyst Directory ............................................. 260 Corporates Latin America High Yield Comprehensive Analysis of ‘B+’ Issuers and Below Analysts Joe Bormann, CFA +1 312 368-3349 joe.bormann@fitchratings.com Jay Djemal +1 312 263-1032 jay.djemal@fitchratings.com Yolanda Torres +1 312 606-2301 yolanda.torres@fitchratings.com Juan Pablo Arias +1 312 606-2329 juan.arias@fitchratings.com Ingo Araujo +55 11 4504-2205 ingo.araujo@fitchratings.com Ana P. Ares +54 11 5235-8121 ana.ares@fitchratings.com Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Miguel Guzman Betancourt +52 81 8399-9100 miguel.guzman@fitchratings.com Gabriela A. Catri +54 11 5235-8129 gabriela.catri@fitchratings.com John C. Culver, CFA +1 312 368-3216 john.culver@fitchratings.com Gabriela Curutchet +54 11 5235-8122 gabriela.curutchet@fitchratings.com Rogelio Gonzalez +52 81 8399-9100 rogelio.gonzalez@fitchratings.com Debora Jalles +55 21 4503-2629 debora.jalles@fitchratings.com Josseline Jenssen +591 2 277-4470 josselne.jenssen@fitchratings.com Viktoria Krane +1 212 908-0367, x1367 viktoria.krane@fitchratings.com Managing Director of Latin America Corporates Daniel R. Kastholm, CFA +1 312 368-2070 daniel.kastholm@fitchratings.com Editorial Advisor Traci Dixon, Editor www.fitchratings.com Credit Outlook Turns Mildly Positive for Speculative Credits Improving Macroeconomic Backdrop: Fitch forecasts GDP growth to be 3.9% in 2013 in Latin America, an improvement from 3.0% in 2012. Consumer demand is strong due to low unemployment levels, rising wages, modest inflation, improving consumer confidence, and wider access to credit. The key growth engine for 2013 is Brazil, which also has the highest number of leveraged corporates in the ‘B’ rating category. Fitch expects growth to reach 4.2% in Brazil during 2013, a sharp improvement from forecasted growth of 1.5% in 2012. Record Capital Market Activity Lowers Refinancing Risk: Latin America corporates issued USD48 billion of debt in the international capital markets during the first nine months of 2012. This figure compares favorably with USD51 billion of issuance activity during the 12 months of 2011. Speculative credits such as Cemex, Digicel, Maestro, Minerva, PDVSA, Virgolino, Cimento Tupi, OAS, OGX, and VRG Linhas Aereas were very active during 2012, issuing about USD9 billion of debt. Eurozone Financial Crisis Should Not Hurt Access to Credit: Concern over the potential for a disorderly default in the eurozone has diminished. As a result, Fitch’s base case scenario expects credit market access for Latin America corporates during 2013 to grow versus 2012 due to low interest rates in developed markets and high demand for emerging market debt. The risk of bank credits being withdrawn from ‘B’ credits in Latin America due to the Euro crisis is small and manageable. Downgrades to Upgrade Ratio Should Revert to Normal Levels: The credit quality of highly speculative corporate ratings in Latin America weakened sharply during the first nine months of 2012. Fitch downgraded nine corporates rated ‘B+’ and lower and upgraded only four similarly rated companies. This compares with 23 upgrades and 21 downgrades for its broader Latin America corporate portfolio. The 2.2x ratio of downgrades to upgrades during 2012 should revert to around 1.0x during 2013. Negative Leverage Trends: Leverage ratios have been weakening since 2009 for the 48 companies rated ‘B+’ and lower due to USD16 billion of additional debt, which was offset by only USD1.4 billion of additional EBITDA. Lower levels of capex in 2013 and an improving operating environment should reverse the trend. During the LTM, the aggregate total debt/EBITDA ratio for these companies was 4.2x, while their collective net debt/EBTIDA ratio was 3.4x. In comparison, during 2009 these leverage ratios were 3.4x and 2.5x, respectively. Modest Direct Exposure to China and Commodities: Direct exposure to China and commodity prices is low among the weakest credits in Latin America. Only seven of the 48 speculative corporates are in the metals and mining, pulp and paper, or oil and gas sectors. All of their businesses are focused on their respective domestic markets. Above-Average Recovery Prospects in the Event of a Default: Fitch’s bespoke analysis for 36 companies that have issued USD20 billion of bonds in the international capital markets indicates above-average aggregate recovery levels of 70% in the event of a default. Concerns about the bankruptcy framework in many markets, as well as the application and enforcement of existing laws, can limit the uplift on issuance ratings. November 8, 2012 Corporates Analysts (Continued) Francisco Mercadal +5 62 499-3340 francisco.mercadal@fitchratings.com Cecilia Minguillón +54 11 5235-8123 cecilia.minguillon@fitchratings.com Alberto Moreno +52 81 8399-9100 Alberto.moreno@fitchratings.com Natalia O’Byrne +57 1 326-9999 natalia.obyrne@fitchratings.com Gisele Paolino +55 21 4503-2624 gisele.paolino@fitchratings.com Renata Pinho +55 11 4504-2207 renata.pinho@fitchratings.com Sergio.Rodriguez, CFA +5281 8399-9100 sergio.rodriguez@fitchratings.com Indalecio Riojas +52 81 8399-9100 indalecio.riojas@fitchratings.com Jose R. Romero +55 11 4504-2601 jose.romero@fitchratings.com Alberto de los Santos +52 81 8399-9100 alberto.delossantos@fitchratings.com Mauro Storino +55 11 4503-2625 mauro.storino@fitchratings.com Fernando Torres +55 11 5235-8124 fernando.torres@fitchratings.com Julio Ugueto +58 212 286-3232 julio.ugueto@fitchratings.com Jose Vertiz +1 212 908-0641 jose.vertiz@fitchratings.com Liliana Yabiku +55 11 4504-2208 liliana.yabiku@fitchratings.com Strong Balance Sheets but High Government Meddling in Argentina: Argentine corporates have strong capital structures to mitigate issues such as high inflation, government intervention, economic uncertainty, and limited access to debt markets. Access to local and international debt markets is restricted due to concerns about the sovereign. Brazilian Corporates Should Benefit from Government Actions: Brazilian corporates in the ‘B’ category are the most leveraged in Latin America. A rebound in the Brazilian economy would be an important step in reversing the negative credit trends that have developed since 2009. Small companies such as Cimento Tupi, Rodopa, Sifco, and Virgolino would benefit most from improving cash flow trends, as they do not have the business profile to attract lending under a distressed scenario. Corporate Governance Remains a Key Concern in Mexico: Many of the weakest credits in Mexico are controlled by families. Concern about corporate governance is extremely high among investors due to a bankruptcy regime that allows intra-company loans to be treated pari pasu with external debt. From a macro perspective, the near-term outlook for Mexican corporates is positive due to a rebound in its manufacturing sector. 2012 Portfolio Overview and Performance Review Fitch’s portfolio of corporates rated ‘B+’ and lower grew to 48 issuers in 2012 from 43 during 2011. The growth of the this speculative group of issuers was due to the addition of five new ratings in the ‘B’ category — Corporacion Electrica Nacional (Corpoelec), Maestro Peru, Rodopa Industria e Comercio de Alimentos Ltda., SANLUIS Rassini, Virgolino de Oliveira S.A., and Acucar e Alcool — and the downgrade of four credits into the ‘B’ category from the ‘BB’ category — Corporacion Pesquera Inca SAC (COPEINCA), GOL Linhas Aereas Inteligentes S.A., Pan American Energy LLC, and Urbi Desarrollos Urbanos, S.A.B. de C.V. During 2012, Fitch withdrew the ‘B–’ rating of Agro Industrial Vista Alegre Ltda., the ‘B’ rating of ODS S.A. and the ‘B’ rating of Galvao Participações. The only company to get upgraded out of the ‘B’ category was TAM S.A., which was upgraded to ‘BB’ from ‘B+’ following its merger with LATAM Airlines Group. The credit performance of these 48 corporates was weaker than Fitch’s broader Latin America portfolio. During the first nine months of 2012, Fitch upgraded the ratings of 23 corporates in Latin America and downgraded the ratings of 21 companies. In contrast, among the highly speculative ratings, downgrades outpaced upgrades by a ratio of 2.2x, as Fitch downgraded nine corporates and only upgraded the ratings of four companies rated ‘B+’ or lower. Upgrades included Arendal to ‘B’ from ‘B–’; TGN to ‘CCC’ from ‘D’; Grupo Senda to ‘B’ from ‘B–’; and TAM to ‘BB’ from ‘B+’. Notable downgrades include Urbi to ‘B’ from ‘BB–’; OGX to ‘B’ from ‘B+’; Axtel to ‘B–’, Rating Watch Negative, from ‘B’; and Transener to ‘CCC’ from ‘B–’. The only defaults among Latin America corporates during 2012 were those of Rede Energia and its subsidiaries, Centrais Eletricas do Para (Celpa) and Centrais Eletricas Matogrossenses S.A. (Cemat). Rede Energia had been rated ‘B–’ since 2009 and was downgraded to ‘CCC’ in 2011, while Celpa and Cemat had been rated ‘B–’ since 2011. These defaults were due to the lethal combination of weak liquidity, high leverage, poor cash flow generation, and large investments. Latin America High Yield November 8, 2012 2 Corporates GDP Growth USA Improving Macroeconomic Backdrop; Inflation Is Key Risk (80%–30% Confidence) 30% 40% 60% Actual 6 30% 50% 70% Projected (%) (%) 6 4 4 2 2 0 0 (2) (2) (4) (4) 2002 2006 2010 F – Forecast. Source: Fitch. 2014F The profile of the lowest rated corporates in Latin America can broadly be broken into two equal camps — those companies domiciled in Venezuela, Argentina, Jamaica, or the Dominican Republic that face high systemic risk, and those whose credit profiles reflect specific, individual corporate risks. Among the second camp, key credit risks may be related to issues such as poor corporate governance, low liquidity, high leverage, and/or a weak business position. The common denominator between both camps is that all corporates benefit from strong regional growth and slow improvements in the global economy. Fitch’s global growth forecast is 2.1% for 2012, 2.6% in 2013 and 3.0% in 2014%. These modest growth levels are projected despite forceful monetary policy interventions by the Fed, ECB, and BoJ during the second half of the year. They highlight sluggish economic growth in the major advanced economies where economic growth is projected at 1.0% in 2012, followed by only a modest acceleration to 1.4% in 2013 and 2.0% in 2014. In contrast to the weak economic outlook in the developed markets, the outlook looks bright for Latin America. Fitch forecasts GDP growth to be 3.9% in 2013 in Latin America and 3.9% in 2014. These figures represent an increase from forecasted growth of 3.0% in 2012. Key growth engines for 2012 will be Brazil at 4.2%, Peru at 6.2%, and Colombia at 4.8%. Chile is also projected to grow at an above-average regional growth rate of 4.6% in 2013, albeit a decline from 4.8% in 2012. Laggards in the region in terms of projected 2013 GDP growth rates include Mexico at 3.6%, Argentina at 2.7%, and Venezuela at 1.6%. At a macro level, central bank reserves are at historically high levels in Latin America, which should provide a buffer against negative external shocks. Foreign direct investment (FDI) levels are also robust and foreign currency-denominated sovereign debt obligations are relatively low for most countries and manageable. At a micro level, demand from consumers has been robust in most countries due to low unemployment levels, rising wages, modest inflation, and improving consumer confidence. These factors, which have led to higher disposable income, have been augmented by the increasing availability of credit in the region. Real GDP Growth (%) Country Argentina Aruba Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Jamaica Mexico Panama Peru Suriname Uruguay Venezuela IDR B BBB BB BBB A+ BBB BB+ B B BB BB+ B BBB BBB BBB BB BB+ B+ Outlook Stable Stable Stable Stable Stable Stable Stable Positive Stable Negative Stable Stable Stable Stable Stable Stable Positive Negative Country Ceiling B A BBBBB+ AA+ BBB BBB B+ B BBB BBB B A A BBB+ B+ BBB B+ 2011 8.87 8.90 5.17 2.70 5.99 5.93 4.16 4.48 7.78 1.47 3.87 1.50 3.90 10.56 6.87 4.43 5.70 3.95 2012F 2.01 (2.00) 5.17 1.50 4.83 4.19 3.70 3.90 4.75 1.65 3.06 0.50 3.80 7.69 5.79 4.42 3.90 5.08 2013F 2.71 8.60 5.16 4.20 4.63 4.82 3.87 4.14 3.74 2.35 3.20 0.90 3.60 7.24 6.17 4.88 4.16 1.55 2014F 2.79 2.60 5.28 4.00 4.94 4.96 3.73 4.84 3.98 2.45 3.42 1.20 3.80 6.34 6.27 5.20 4.93 2.56 F – Forecast. IDR – Issuer default rating. Source: Fitch. Latin America High Yield November 8, 2012 3 Corporates Growth in the BRICs (%) Brazil Russia Indiaᵃ China 2011 2012F 2013F 2014F 2.7 1.5 4.2 4 4.3 3.5 3.5 4 6.5 6 7 7.5 9.2 7.8 8.2 7.5 a India forecasts represent fiscal years: 2011 = FY12, 2012 = FY13. F – Forecast. Source: Fitch. Inflation remains a key risk for the region as loose monetary and fiscal policies in developed markets have increased the money supply. Several central banks in Latin America have taken actions to weaken their currencies in response to the measure taken by the Fed, ECB, and BoJ. In Latin America, food and energy are a disproportionally high percentage of the consumer basket. Food, as a percentage of the CPI basket, is more than 35% in Peru and ranges between 20% and 30% in Brazil, Colombia, and Mexico. Any sharp increase in the prices for these items could weaken disposable income in the region and could lower demand. Weakening Leverage Trend Should Abate BRIC Contributions to Quarterly Real GDP Growth Net Exports Investment Government Consumption Private Consumption GDP (Year over Year %) 15 Leverage ratios have been trending down since 2009 due to a USD16 billion increase in aggregate debt levels and only a USD1.4 billion increase in EBITDA. During the last 12 months (LTM), the aggregate total debt/EBITDA ratio for the companies rated ‘B+’ and lower was 4.2x, while the net debt/EBTIDA ratio was 3.4x. The former ratio compares unfavorably with ratios of 4.0x in 2011, 3.5x in 2010, and 3.4x in 2009, while the net leverage ratio shows weakness versus 3.1x in 2011, 2.6x in 2010, and 2.5x in 2009. Combined, the group of credits rated ‘B+’ and lower have USD12 billion of cash, USD13 billion of short-term debt obligations and USD63 billion of total debt obligations. These figures compare with USD15.1 billion of EBITDA generation during the LTM. They exclude PDVSA, which is owned by the Venezuelan government and is disproportionally large relative to the other 47 corporates. 10 Leverage is significantly higher for the group if you eliminate the 24 companies domiciled in countries rated ‘B+’ or lower, whose ratings are capped by the sovereign ceilings of Argentina, Venezuela, the Dominican Republic, and Jamaica. The trends are also negative for this group of corporates. 5 0 (5) Source: IBGE, Fitch. BRIC Industrial Production (Year-over-Year Growth) (%) 25 20 15 10 5 0 (5) (10) Source: FGV. Latin America High Yield November 8, 2012 During the LTM, the 24 companies domiciled in the investment-grade countries — Brazil, Mexico, and Peru — generated USD5.4 billion of EBITDA. This compares with USD5.5 billion in 2011, USD6.2 billion in 2010, and USD5.6 billion in 2009. Total debt for these 24 companies increased to USD45 billion from USD34 billion during this time period, while cash and marketable securities declined to USD9 billion from USD10 billion. As a group, the total leverage ratio of the companies in investment-grade markets climbed to 8.4x from 6.1x, while net leverage rose to 6.8x from 4.4x. These ratios are heavily affected, however, by the increasing leverage of large companies such as Marfrig, Minerva, OGX, and CEMEX. Median ratios show far less leverage but similar trends. The median net leverage ratio of the Brazilian, Mexican, and Peruvian corporates was 3.8x in the LTM, similar to 2011 levels, but up from 3.2x in 2009. Robust Debt Capital Market Activity to Continue; History Suggests Caution Issuance totals were at elevated levels during 2012, as investors aggressively sought emerging market corporate debt due to slow economic growth rates and low interest rates in developed markets. Many Latin America corporates improved their capital structures by accessing financing with lower rates and longer tenors. 4 Corporates Non-FI Latin America Corporate Debt Issuance (First-Quarter 2006–Thrid-Quarter 2012) International (USD Bil.) Domestic Total 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Source: Fitch Ratings. During the first nine months of 2012, Latin America corporates issued USD48 billion of debt in the international capital markets. This compares favorably with the yearly totals for 2011, 2010, and 2009 of USD 51 billion, USD 44 billion, and USD 40 billion, respectively. Market activity was widespread and constant throughout the year. Through the first nine months, 70 different issuances occurred. This total is equal to that for all of 2011 and only slightly lower than the level achieved in 2010, when 72 different transactions occurred. The strong volumes heading into the last quarter suggest that new levels of market activity will be reached. In contrast to 2011, where market activity ground to a halt during the second half of the year following the acceleration of the euro crisis, cross border debt activity was relatively constant throughout 2012. High risk credits benefited from the strong market. Cemex, Digicel, Maestro, Minerva, PDVSA, Virgolino, Cimento Tupi, OAS, OGX, and VRG Linhas Aereas issued about USD9 billion of debt in the international capital markets, or about 20% of the cross border market activity. Local markets have also been a healthy source of funding for Latin America corporates. During the first nine months of 2012, Latin America corporates raised USD20 billion of debt through 141 issuances in the local debt capital markets. The most robust market in the region was Brazil, which accounted for USD14 billion of the total activity through 57 separate issuances. History suggests that Latin America corporates cannot count on market windows being open at all moments. The market was essentially closed to Latin America corporates during the third and fourth quarter of 2008 and during the month of August during 2011. Some of the largest debt amortizations occurring before the end of 2014 are those of Grupo Posadas (MXN2.250 billion, April 2013), and Digicel (USD510 million, April 2014). GDP Growth Euro Zone (80%–30% Confidence) 30% 40% 60% Actual 6 30% 50% 70% Projected (%) (%) Eurozone Financial Crisis Should Not Hurt Access to Credit in 2013 6 4 4 2 2 0 0 (2) (2) (4) (4) 2002 2006 2010 F – Forecast. Source: Fitch. Latin America High Yield November 8, 2012 2014F Risks related to the Euro financial crisis remain the most crucial global risk monitored by Fitch in terms of urgency and the potential negative impact upon credits globally. As of Sept. 30, 2012, 45% of Western European sovereign ratings had a Negative Outlook, as did 37% of the financial institutions in the region and 21% of corporates. Weak business and household sentiment in the region, high unemployment levels, tight financing conditions and the impact of fiscal consolidation on domestic economic activity will curb growth in the eurozone. For 2012, Fitch projects that GDP in the eurozone will contract by 0.5%. During 2013 and 2014, Fitch projects continued weak growth rates of 0.3% and 1.4%, respectively. 5 Corporates Key euro-related risks for speculative Latin America corporates are whether capital market access would disappear for a prolonged period of time and if bank lines would be withdrawn. Secondary risks would be whether economic growth rates in the region would drop sharply if broad-based support for the euro dissolved, which is not Fitch’s base case, and whether export opportunities would diminish. Positively for all corporates, including the ‘B’ rated companies in Latin America, concern over the potential for a shock to the eurozone from a disorderly default has been lessened as ongoing negotiations among politicians in Europe represent a willingness to maintain the European Union. The willingness to make concessions, as well as the aggressive position taken by the ECB, should result in a gradual normalization of financial market conditions. Fitch’s base case scenario is that credit market access for Latin America corporates during 2013 will grow vis-à-vis 2012 given low interest rates and strong demand for emerging market debt. This type of environment suggests that most corporates will have the opportunity to refinance upcoming debt obligations, including the most speculative credits. It is doubtful, however, that the pace of market activity will remain as steady as 2012. The risk of bank credits being withdrawn from ‘B’ credits in Latin America due to the Euro crisis is small and should be manageable. The largest foreign banking presence in the region is in Chile, where foreign loans as a percentage of GDP is estimated to be close to 30%. Fitch has no corporates rated in the ‘B’ range in that country. In contrast, the presence of foreign banks is low in the countries where 60% of the ‘B’ rated corporates are domiciled — Argentina and Brazil. In Brazil, foreign bank loans are less than 10% of GDP and in Argentina they are less than 4% of GDP. If a credit line is withdrawn by a foreign bank in Brazil, most companies with reasonable business prospects should be able to obtain financing either from a government or private sector bank. The foreign banking presence in Mexico and Peru ranges between 12% and 15% of GDP. These two countries combined account for 23% of the lowest rated credits. Trade Balance with China Five-Year Average (20062010) Country Chile Costa Rica Peru Venezuela Brazil Argentina Bolivia Aruba Dom. Rep. Jamaica Colombia Uruguay El Salvador Guatemala Ecuador Suriname Mexico Panama LatAm X/GDP 6.2 3.6 3.0 1.5 1.1 1.7 0.8 0.0 0.3 0.7 0.4 1.0 0.0 0.1 0.4 0.3 0.2 0.0 1.1 M/GDP TB/GDP 3.5 2.7 2.5 1.1 2.6 0.4 1.2 0.3 1.0 0.0 1.8 (0.2) 1.2 (0.5) 0.9 (0.9) 1.4 (1.1) 1.9 (1.2) 1.7 (1.3) 2.4 (1.4) 2.0 (2.0) 2.2 (2.1) 3.0 (2.6) 3.2 (2.8) 3.4 (3.1) 5.6 (5.6) 2.0 (0.8) X – Exports. M – Imports. TB – Trade balance. Source: UNCTAD, Fitch. Latin America High Yield November 8, 2012 Modest Direct Exposure to China and Commodities The slowdown in China’s economy to 7.6% in second-quarter 2012 from 9.3% in 2011 has refocused attention on the possibility of slower future growth rates. Fitch has trimmed its expectations for China’s 2012 growth to 7.8% and expects growth to rebound slightly to 8.2% in 2013 due to some modest quasi-fiscal stimulus. Direct exposure to China and commodity prices is low among the weakest credits. Only seven of the 48 speculative corporates are in the metals and mining, pulp and paper, or oil and gas sectors. All of their businesses are focused on their respective domestic markets. None of them export to China. Two Brazilian protein producers, Marfrig and Minerva, have a very small percentage of their revenues linked to China — Minerva through exports and Marfrig via a joint venture. Despite modest direct links to China among these credits, the indirect impact upon companies cannot be underestimated due to China’s size and contribution to global growth. Since 2006, the level of exports from Latin America to China has increased to USD76 billion in 2010 from USD25 billion. Nearly 77% of the region’s commodity sales and 70% of its total exports to China were comprised by only eight primary products: copper, feedstuff, gas, meat, metal ores and scrap, oil, pulp, and soy. 6 Corporates Fitch’s Ratings Actions During the Commodity Boom (2003–2011) Country Brazil Argentinaª Peru Uruguayª Bolivia Chile Colombia Panama Costa Rica Ecuadorª Mexico Suriname Venezuela Aruba Guatemala Dom. Rep.ª El Salvador Jamaicaª LT FC IDR BBB B BBB BB+ B+ A+ BBB BBB BB+ B BBB B+ B+ BBB BB+ B BB B Net Notching 6 5 4 4 2 2 2 2 1 1 1 1 1 0 0 -1 -1 -2 ªTotals are influenced by multi-notch upgrades/downgrades during sovereign defaults or restructuring exercises. Note: Countries in bold have deeper trade and financial linkages with China. LT – Longterm. FC – Foreign currency. IDR – Issuer default ratings. Source: Fitch. A Decade-Long Commodity Price Boom (Jan. 2000 = 100) Oil 700 Soy Copper Gold (Index) 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Bloomberg, Fitch. Five Latin American economies — Brazil, Chile, Costa Rica, Peru, and Venezuela — accounted for 81% of the total regional sales to the Asian giant in 2010. Among them, Brazil, Chile, and Peru have achieved the greatest ratings momentum by turning a cyclical upturn into credit strength, as they strengthened their external liquidity and solvency positions. Colombia has also benefited. On the other side of the equation, Jamaica and the Dominican Republic have suffered from rising energy and food costs, as it imports these products. These countries faced balance of payments imbalances and confidence shocks, making them reliant upon the IMF. Higher Government Meddling in Argentina; Strong Balance Sheets Argentine corporates represent 16 of the 48 companies rated in the ‘B’ category or lower by Fitch. These companies have strong capital structures to mitigate issues such as high inflation, government intervention, economic uncertainty, and limited access to debt markets. The median liquidity ratio (measured by cash plus EBITDA/short-term debt) of these corporates is 2.0x, while the median leverage ratio is 1.6x. These key credit protection measures are much stronger than that of their ‘B’ rated peer group, which are not constrained by systemic government risk. All but two of the corporate ratings in Argentina are capped by the ‘B’ country ceiling of the Argentine government due to their exposure to the imposition of transfer and convertibility restrictions on foreign currency. The trend has not been positive for capital controls as the government has tightened exchange restrictions in response to declining reserve levels. Several of the ratings were placed on Rating Watch Negative on Oct 31, 2012, following Fitch's decision to place the ‘B’ foreign currency issuer default rting (IDR) of the Republic of Argentina (Argentina) on Rating Watch Negative, as a result of increased uncertainty about the government’s ability to service its international securities issued under New York Law due to a ruling in a U.S. court about on a timely basis using the U.S. financial system. In and of itself, this ruling should not directly affect the ability of the Argentine corporates to make payments on their foreign currency obligations using the U.S. financial system. Indirectly, this ruling may further affect the willingness of the Argentine government to provide corporates with foreign exchange to make payments to their cross currency debt obligations. Debt capital market activity has been limited for Argentine corporates due to concerns about government interference in the private sector. During 2012, no Argentine corporate issued bonds in the international markets. International issuances have ground to a halt following the government’s actions after the 2011 elections — particularly the nationalization of YPF, the Latin America High Yield November 8, 2012 7 Corporates LatAm's Main Trading Partners (% of Total Exports and Imports ) China LatAm (%) 60 50 40 30 20 10 0 Source: UNCTAD, Fitch. E.U. U.S. imposition of additional capital controls on select industries, and the change in the central bank’s charter. Among companies with international ratings, only IRSA, IMPSA, Cresud, and YPF placed bonds in the domestic market during 2012. Many companies are reluctant to tap the local debt market following the nationalization of the pension funds, as they seek to limit the government’s ownership of their stock and bonds. Argentina’s economy is intertwined with Brazil’s through exports, as it ships about 20% of its exports to Brazil — or close to 40% of its total Latin America exports. These corporates could benefit from a cyclical rebound in the Brazilian economy that should lead to growth in excess of 4% in Brazil during 2013. Approximately 67% of Argentine exports to Brazil are in the manufacturing sector. Vehicles and auto parts make up the bulk of this number. This sector should perform well in 2013. Argentina is also highly reliant upon the export of soybeans, which should enjoy a good year due to the record drought in the U.S. that has led to elevated soy prices globally. Brazil Corporates Should Benefit from Government Actions; Trends Have Been Negative Brazilian corporates in the ‘B’ category are the most leveraged in Latin America and the credit protection measures have been weakening both in relative and aggregate terms. The dozen speculative credits in Brazil can be roughly divided into two groups: small companies with low leverage and large companies such as Marfrig, OAS, and GOX that have weak capital structures. A rebound in the Brazilian economy would be an important step in reversing the negative trends that have developed since 2009. Small companies such as Cimento Tupi, Rodopa, Sifco, and Virgolino would benefit most from improving cash flow trends, as they do not have the business profile to attract lending under a distressed scenario. Fitch expects growth to reach 4.2% in Brazil during 2013, a sharp improvement from forecasted growth of 1.5% in 2012. The poor 2012 performance is a result of the weak industrial sector, which contracted by 2.4% in the second quarter. This sector’s performance was hurt by soft external market conditions and rising costs. Monetary stimulus as well as temporary tax breaks and continued quasi-fiscal stimulus through the development bank BNDES will be key components of the recovery. Key sales tax breaks include those on autos and white goods. Cement, steel, and construction companies should benefit from the government’s USD66 billion plan to improve the country’s infrastructure. In terms of competitiveness, manufacturing companies should be better able to compete with their global peers due to measures the government recently took to reduce electricity tariffs. Exporters should benefit from a Brazilian real that is managed by the government to be in the range of BRL2.0/USD. This exchange level should also slow the tide of imports, as will import tariffs on approximately 100 different goods. The aggregate total leverage ratio for the dozen Brazilian credits rated in the highly speculative category was 12.6x during the LTM, while the net leverage ratio was 8.5x. These are increases from 9.5x and 5.8x in 2011. Some of the largest companies — Rede, OGX, OAS, GOL, and Virgolino — have driven the weakening of aggregate protection measures. Median ratios, which eliminate the impact of the large and highly leveraged companies, show lower leverage levels, but also highlight negative trends. For the LTM, the median net leverage Latin America High Yield November 8, 2012 8 Corporates ratio of the Brazilian credits was 5.2x. This ratio compares unfavorably with those of 4.5x in 2011 and 4.0x in 2010 and is about 60% higher than during 2009 when it was 3.2x. Corporate Governance Remains a Key Concern in Mexico The 10 credits in Mexico rated in the range of ‘B+’ or lower are in industries such as cement, home building, auto parts, oil services, food and beverage, packaging, retailing, lodging, and transportation. This disparate group of credits have few things in common other than high leverage. Some corporates, such as Arendal and Axtel, are small relative to their competitors. Others, such as Urbi and Javer, are relatively big companies within fragmented industries that exhibit high operating risk. Several companies are in the ‘B’ category because their management teams have made poor strategic or financial decisions. This group includes companies such as Posadas, Cemex, Bio-Pappel, Senda, and SANLUIS. Unlike its peers in Brazil, the Mexican credits have been deleveraging during the past few years. The median net leverage ratio of the Mexican credits during the LTM was 3.3x. This ratio compares with 3.8x in 2011 and 3.7x in 2010 and 4.3x in 2009. From a macro perspective, the near-term outlook for Mexican corporates is positive. Mexico’s exposure to the U.S. is high due to trade and remittances. For 2013 and 2014, Fitch projects U.S. growth rates of 2.25% and 2.8%, respectively. These growth rates should support growth levels in Mexico of about 3.6% in 2013 and 3.8% during 2014. Continuing challenges that need to be addressed to increase Mexico’s low growth rate relative to other emerging economies are the country’s moderate saving and investment rates, monopolies in important industries, state ownership of the energy sector, high labor informality, and limited flexibility. A bright spot for the Mexican economy has been a revival of its manufacturing sector due to the country’s close proximity to the U.S. market and rising costs in China. The auto sector has probably been the sector that has benefited to the greatest degree. Unlike several countries in Latin America that have a high degree of exposure to China and commodity prices, Mexico’s risks as they relate to those issues are more modest. Exports to China have averaged about 0.2% of GDP during the past five years, while imports have averaged 3.4% of GDP. While corporate governance is a global credit concern, unease is extremely high among investors in the weakest credits in Mexico. The bankruptcy regime in Mexico is relatively new and untested. There is a lack of precedent on many issues and rulings can be unpredictable. Many of the lowest rated Mexican corporates are controlled by families, despite being publicly traded companies. The participation of key family members as executives in business operations is high and there is often a lack of independent members in the board of directors. Related party transactions are numerous. The actions of Mexican glassmaker Vitro have elevated concerns about corporate governance and Mexico’s bankruptcy regime. Vitro defaulted on its debt during 2009 due to declining demand for glass from construction and auto manufacturers, losses on derivative instruments, and a weak capital structure. After the default, the company created a very large intracompany loan. In late 2010, the company filed for bankruptcy and these intracompany loans were recognized by the judge in the case, which allowed them to vote on the restructuring plan. This essentially gave the company’s shareholders the ability to impose large losses on external creditors and retain control. Vitro’s actions could have repercussions for companies that want to issue bonds in the future. CEMEX’s new facilities agreement, which was completed in September 2012, had restrictions and conditions imposed on intercompany loans. Among them, any amount payable under any Latin America High Yield November 8, 2012 9 Corporates intercompany claim of any obligor would be subordinated to claims under the new facilities agreement and all other senior debt of such obligors in the event of insolvency or similar proceedings in relation to Cemex. The Intercreditor Agreement established a Mexican-law regulated voting trust mechanism whereby intercompany claims of Cemex entities incorporate in Mexico at any time would be voted in a Concurso Mercantil proceeding in accordance with a trustee that is under instruction from the third-party lenders under the new facilities agreement. Recovery Prospects Are Above Average in the Event of a Default Fitch’s bespoke analysis for 36 companies that have USD20 billion of bonds in the international capital markets (excluding PDVSA) and have USD56 billion of combined debt indicates an aggregate recovery of 70%. This recovery level is consistent with above-average recovery expectations in the event of default, or an ‘RR3’ rating. Despite high anticipated levels of recoveries, many of the rated bonds have been assigned recovery ratings of ‘RR4’, which is consistent with recoveries in the range of 30%–50%. The recovery ratings of many of these bonds were constrained due to concerns about the bankruptcy framework in many markets, as well as the application and enforcement of existing laws. Fitch Default Rates by Major Sector: Jan. 1, 2012–June 30, 2012 (%) AAA AA A BBB BB B CCCᵃ Global Corporates 0.00 0.00 0.00 0.00 0.00 0.79 15.38 Latin America Corporates 0.00 0.00 0.00 0.00 0.00 2.44 33.33 0.00 1.07 0.33 0.00 1.78 0.96 Investment Grade Speculative Grade All ᵃIncludes ‘CCC’ to ‘C’ for corporates, sovereigns, and public finance. Source: Fitch Ratings. Latin America High Yield November 8, 2012 10 Corporates Latin America Non-Financial Institutions Corporate Financial Statistics (USD Mil.) Company Name AES Andres Dominicana SPV (Aes Dominicana) Alto Palermo S.A. (APSA) Arcor S.A.I.C. Arendal, S. de R. L. de C. V. Axtel, S.A.B. de C.V. Bio-PAPPEL, S.A.B. de C.V. Cablevision S.A. Capex S.A. Ceagro Agricola Ltda. Celulosa Argentina S.A. CEMEX, S.A.B. de C.V. Cimento Tupi S.A. Clarendon Alumina Production Limited (CAP) Compania de Transporte de Energia Electrica en Alta Tension Transener S.A. Compania Latinoamericana de Infraestructura y Servicios Construtora OAS Ltda Corporacion Pesquera Inca SAC (COPEINCA) Cresud S.A.C.I.F. y A. Digicel Group Limited Empresa Generadora de Electricidad Haina, S.A. Empresa Generadora de Electricidad Itabo, S.A. GOL Linhas Aereas Inteligentes S.A. Grupo Famsa, S.A.B. de C.V. Grupo Posadas, S.A. de C.V. Grupo Senda Autotransporte, S.A. de C.V. (Grupo Senda) Industrias Metalurgicas Pescarmona S.A. (IMPSA) Inversiones y Representaciones S.A. Maestro Peru S.A. Marfrig Alimentos S.A. Minerva S.A. OAS S.A. OGX Petroleo E Gas Participacoes S.A. Pan American Energy LLC Petroleos de Venezuela S.A. (PDVSA) Rede Energia S.A. Rodopa Industria e Comercio de Alimentos Ltda. SANLUIS Rassini, S.A. de C.V. Servicios Corporativos Javer, S.A.P.I. de C.V. Siderurgica del Turbio, S.A. (Sidetur) Sifco S.A. Telecom Argentina S.A. Transportadora de Gas del Norte S.A. (TGN) Transportadora de Gas del Sur S.A. (TGS) Urbi Desarrollos Urbanos, S.A.B. de C.V. Virgolino de Oliveira S/A Acucar e Alcool WPE INTERNATIONAL Cooperatief U.A. YPF S.A. LTM as of June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 May 2012 June 2012 June 2012 March 2011 2009 63 17 186 5 107 75 38 24 4 6 1,080 9 1 Cash 2010 2011 120 131 18 42 190 99 5 6 106 102 59 69 100 126 26 45 120 43 6 7 676 1,153 5 28 1 4 2012a 155 31 126 24 51 80 143 6 24 7 611 35 N.A. Total Short-Term Debt Total Debt 2009 2010 2011 2012a 2009 2010 2011 2012a 5 N.A. N.A. N.A. 161 164 164 164 62 52 30 18 246 226 180 172 178 140 161 154 417 497 449 472 29 31 27 35 31 32 35 37 72 53 27 26 758 844 894 873 3 7 9 9 260 275 282 248 52 33 72 101 542 512 655 652 8 20 20 27 261 199 230 238 10 9 34 31 34 131 156 149 80 69 77 72 212 173 157 159 595 465 381 109 19,381 17,894 18,162 17,251 20 30 26 33 42 63 155 215 128 89 169 N.A. 460 373 424 N.A. June 2012 16 27 32 28 14 13 4 4 159 148 155 154 June 2012 June 2012 June 2012 June 2012 June 2012 March 2012 June 2012 June 2012 June 2012 June 2012 93 138 12 56 492 40 79 818 131 50 83 312 34 76 1,041 111 72 1,174 90 47 95 608 60 173 613 184 53 1,205 104 30 61 384 43 110 343 149 51 843 134 35 58 19 38 142 350 6 N.A. 340 786 72 107 46 16 272 166 20 N.A. 205 898 17 159 87 48 322 388 48 N.A. 835 890 40 159 98 83 242 228 48 N.A. 300 987 194 192 146 144 372 3,140 202 125 1,801 864 380 268 199 218 490 3,793 207 131 2,219 1,100 471 313 414 266 832 4,528 281 129 2,685 1,162 452 346 571 293 858 4,887 301 129 2,590 1,257 443 June 2012 11 11 12 7 29 30 35 30 222 218 225 216 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 Dec. 2011 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 93 68 4 1,743 244 392 4,216 232 6,981 238 2 13 62 58 49 341 81 271 336 N.A. 93 567 62 86 6 2,299 342 690 2,516 434 6,017 451 15 21 40 51 72 351 124 275 487 23 62 639 53 93 6 1,871 402 788 2,936 958 8,610 369 19 21 30 29 90 658 153 107 395 54 53 341 61 84 6 1,499 405 925 2,942 753 N.A. 221 18 37 27 45 99 521 175 150 432 91 61 102 111 93 29 942 167 185 173 384 2,956 857 8 218 21 19 43 202 381 4 295 N.A. 111 1,238 117 156 19 1,911 141 393 134 381 3,604 1,352 37 208 2 9 141 11 414 4 263 332 117 1,561 169 167 46 1,491 291 521 12 447 2,396 1,939 57 41 8 5 155 4 453 4 461 271 169 1,894 324 578 579 845 127 370 421 597 64 53 55 111 1,698 3,252 6,055 6,437 139 703 972 1,131 635 719 1,554 2,019 43 173 141 2,574 747 1,554 1,759 1,756 N.A. 21,445 24,950 34,892 1,729 3,893 4,600 4,429 79 16 55 92 50 233 364 250 4 201 210 276 5 106 90 83 176 220 360 367 7 217 41 31 473 381 414 453 4 401 380 379 259 603 888 1,067 324 N.A. 717 879 324 578 579 845 2,186 1,804 1,969 2,980 1,343 584 122 6,143 1,204 2,410 3,994 1,874 N.A. 3,725 98 259 275 79 368 29 473 378 1,426 1,092 1,343 2,350 a LTM. N.A. Not applicable. Continued on next page. Source: Fitch Ratings. Latin America High Yield November 8, 2012 11 Corporates Latin America Non-Financial Institutions Corporate Financial Statistics (Continued) Company Name LTM as of AES Andres Dominicana SPV (Aes Dominicana) June 2012 Alto Palermo S.A. (APSA) June 2012 Arcor S.A.I.C. June 2012 Arendal, S. de R. L. de C. V. June 2012 Axtel, S.A.B. de C.V. June 2012 Bio-PAPPEL, S.A.B. de C.V. June 2012 Cablevision S.A. June 2012 Capex S.A. June 2012 Ceagro Agricola Ltda. June 2012 Celulosa Argentina S.A. May 2012 CEMEX, S.A.B. de C.V. June 2012 Cimento Tupi S.A. June 2012 Clarendon Alumina Production Limited (CAP) March 2011 Compania de Transporte de Energia Electrica en Alta Tension Transener S.A. June 2012 Compania Latinoamericana de Infraestructura y Servicios June 2012 Construtora OAS Ltda June 2012 Corporacion Pesquera Inca SAC (COPEINCA) June 2012 Cresud S.A.C.I.F. y A. June 2012 Digicel Group Limited June 2012 Empresa Generadora de Electricidad Haina, S.A. March 2012 Empresa Generadora de Electricidad Itabo, S.A. June 2012 GOL Linhas Aereas Inteligentes S.A. June 2012 Grupo Famsa, S.A.B. de C.V. June 2012 Grupo Posadas, S.A. de C.V. June 2012 Grupo Senda Autotransporte, S.A. de C.V. (Grupo Senda) June 2012 Industrias Metalurgicas Pescarmona S.A. (IMPSA) June 2012 Inversiones y Representaciones S.A. June 2012 Maestro Peru S.A. June 2012 Marfrig Alimentos S.A. June 2012 Minerva S.A. June 2012 OAS S.A. June 2012 OGX Petroleo E Gas Participacoes S.A. June 2012 Pan American Energy LLC June 2012 Petroleos de Venezuela S.A. (PDVSA) Dec. 2011 Rede Energia S.A. June 2012 Rodopa Industria e Comercio de Alimentos Ltda. June 2012 SANLUIS Rassini, S.A. de C.V. June 2012 Servicios Corporativos Javer, S.A.P.I. de C.V. June 2012 Siderurgica del Turbio, S.A. (Sidetur) June 2012 Sifco S.A. June 2012 Telecom Argentina S.A. June 2012 Transportadora de Gas del Norte S.A. (TGN) June 2012 Transportadora de Gas del Sur S.A. (TGS) June 2012 Urbi Desarrollos Urbanos, S.A.B. de C.V. June 2012 Virgolino de Oliveira S/A Acucar e Alcool June 2012 WPE INTERNATIONAL Cooperatief U.A. June 2012 YPF S.A. June 2012 Operating EBITDA (USD Mil.) 2009 2010 2011 2012a 82 164 183 150 49 113 144 157 210 193 248 265 4 7 18 36 294 261 256 240 71 81 55 68 389 449 464 483 53 34 45 41 19 58 50 49 42 52 65 60 2,768 2,372 2,080 2,321 37 32 34 33 (16) (14) (39) N.A. Cash/Short-Term Debt (x) 2009 2010 2011 2012a 12.60 N.A. N.A. N.A. 0.27 0.34 1.41 1.71 1.04 1.36 0.62 0.82 0.17 0.17 0.24 0.70 1.48 1.99 3.74 1.95 23.23 9.02 7.68 9.25 0.73 3.07 1.76 1.42 3.18 1.25 2.22 0.22 0.36 12.98 1.27 0.78 0.08 0.08 0.09 0.10 1.82 1.45 3.02 5.62 0.46 0.15 1.06 1.05 0.01 0.01 0.02 N.A. Cash+EBITDA/ Short-Term Debt (x) 2009 2010 2011 2012a 29.00 N.A. N.A. N.A. 1.05 2.49 6.27 10.37 2.22 2.74 2.16 2.54 0.30 0.38 0.93 1.75 5.55 6.91 13.13 11.15 45.36 21.34 13.78 17.13 8.22 16.86 8.26 6.22 10.21 2.93 4.44 1.75 2.31 19.31 2.77 2.37 0.60 0.84 0.93 0.93 6.47 6.55 8.48 26.97 2.26 1.23 2.37 2.04 (0.11) (0.15) (0.20) N.A. 48 54 32 8 1.21 2.05 7.44 7.36 4.72 6.10 14.84 9.48 85 63 60 88 676 45 70 320 119 95 110 19 76 195 753 79 (6) 581 138 83 140 112 100 226 919 112 27 109 121 68 148 21 112 197 1,070 119 43 1 141 71 1.60 7.24 0.33 0.39 1.41 6.59 N.A. 2.40 0.17 0.70 0.78 6.74 2.13 0.28 6.27 5.66 N.A. 5.72 0.10 2.73 0.60 6.98 1.27 0.54 1.58 3.86 N.A. 1.44 0.12 0.76 0.38 3.90 0.52 0.45 1.51 3.13 N.A. 2.81 0.14 0.18 3.06 10.58 1.88 1.01 3.34 14.02 N.A. 3.34 0.32 2.02 1.81 7.14 6.85 1.00 10.80 9.67 N.A. 8.55 0.25 7.57 1.47 8.27 3.36 1.24 3.95 6.21 N.A. 1.57 0.25 2.47 1.31 4.11 1.87 1.27 6.21 5.62 N.A. 2.82 0.28 0.54 40 62 58 99 102 180 114 180 186 19 25 34 471 891 954 107 146 176 92 106 188 (186) (244) (389) 1,487 1,435 1,779 11,065 24,171 18,684 684 723 752 14 16 36 39 86 90 83 71 64 119 33 62 21 51 56 1,032 1,151 1,312 70 48 18 204 175 181 316 329 312 N.A. 180 167 99 102 180 3,130 3,728 3,275 66 N.A. 202 38 1,005 190 110 (448) 1,521 N.A. 607 35 93 72 84 54 1,339 11 173 327 128 N.A. 3,358 0.39 0.84 0.74 0.14 1.85 1.46 2.12 24.38 0.60 2.36 0.28 0.25 0.06 3.01 2.98 1.15 1.69 0.21 68.42 1.14 N.A. 0.84 0.46 0.36 0.34 0.53 0.31 0.55 0.55 0.29 0.13 1.20 1.25 2.43 1.38 1.76 1.51 18.77 248.09 1.14 2.14 1.67 3.59 0.33 0.19 0.40 0.33 0.10 0.51 25.32 3.84 5.81 5.83 0.51 0.58 33.02 148.32 0.30 0.34 74.31 28.98 1.85 0.86 0.07 0.20 0.53 0.31 0.41 0.18 0.24 1.80 2.43 1.98 2.40 0.19 1.72 1.41 1.38 0.19 0.66 1.96 1.70 1.66 2.25 0.09 0.78 1.62 0.86 0.68 0.88 2.35 1.67 1.89 1.47 2.92 2.09 3.47 1.98 4.29 1.46 2.62 2.03 1.88 1.63 68.32 23.31 16.94 215.18 57.92 1.01 4.47 4.90 6.12 3.04 N.A. 6.10 8.38 11.39 N.A. 0.13 1.08 0.87 0.58 0.48 0.23 2.05 0.85 0.96 0.67 0.74 0.24 0.51 2.69 2.60 6.34 7.08 70.55 12.16 23.47 8.94 9.15 9.54 18.17 25.66 0.56 1.65 0.88 0.94 0.87 76.00 6.80 141.48 444.05 271.39 0.37 0.40 0.42 0.38 0.39 40.84 119.88 121.64 77.83 87.89 1.67 2.21 3.10 1.53 2.93 0.28 N.A. 0.61 0.81 0.67 0.19 1.72 1.41 1.38 0.19 0.05 2.99 2.80 1.91 1.58 a LTM. N.A. Not applicable. Continued on next page. Source: Fitch Ratings. Latin America High Yield November 8, 2012 12 Corporates Latin America Non-Financial Institutions Corporate Financial Statistics (Continued) Company Name AES Andres Dominicana SPV (Aes Dominicana) Alto Palermo S.A. (APSA) Arcor S.A.I.C. Arendal, S. de R. L. de C. V. Axtel, S.A.B. de C.V. Bio-PAPPEL, S.A.B. de C.V. Cablevision S.A. Capex S.A. Ceagro Agricola Ltda. Celulosa Argentina S.A. CEMEX, S.A.B. de C.V. Cimento Tupi S.A. Clarendon Alumina Production Limited (CAP) Compania de Transporte de Energia Electrica en Alta Tension Transener S.A. Compania Latinoamericana de Infraestructura y Servicios Construtora OAS Ltda Corporacion Pesquera Inca SAC (COPEINCA) Cresud S.A.C.I.F. y A. Digicel Group Limited Empresa Generadora de Electricidad Haina, S.A. Empresa Generadora de Electricidad Itabo, S.A. GOL Linhas Aereas Inteligentes S.A. Grupo Famsa, S.A.B. de C.V. Grupo Posadas, S.A. de C.V. Grupo Senda Autotransporte, S.A. de C.V. (Grupo Senda) Industrias Metalurgicas Pescarmona S.A. (IMPSA) Inversiones y Representaciones S.A. Maestro Peru S.A. Marfrig Alimentos S.A. Minerva S.A. OAS S.A. OGX Petroleo E Gas Participacoes S.A. Pan American Energy LLC Petroleos de Venezuela S.A. (PDVSA) Rede Energia S.A. Rodopa Industria e Comercio de Alimentos Ltda. SANLUIS Rassini, S.A. de C.V. Servicios Corporativos Javer, S.A.P.I. de C.V. Siderurgica del Turbio, S.A. (Sidetur) Sifco S.A. Telecom Argentina S.A. Transportadora de Gas del Norte S.A. (TGN) Transportadora de Gas del Sur S.A. (TGS) Urbi Desarrollos Urbanos, S.A.B. de C.V. Virgolino de Oliveira S/A Acucar e Alcool WPE INTERNATIONAL Cooperatief U.A. YPF S.A. Total Net Debt with Equity Credit/ Operating EBITDA (x) 2009 2010 2011 LTM as of Short-Term Debt/Total Debt (x) 2009 2010 2011 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 May 2012 June 2012 June 2012 March 2011 0.03 0.25 0.43 0.92 0.10 0.01 0.10 0.03 0.29 0.38 0.03 0.48 0.28 N.A. 0.23 0.28 0.98 0.06 0.02 0.06 0.10 0.07 0.40 0.03 0.48 0.24 N.A. 0.16 0.36 0.75 0.03 0.03 0.11 0.09 0.22 0.49 0.02 0.17 0.40 N.A. 0.11 0.33 0.93 0.03 0.03 0.15 0.11 0.21 0.45 0.01 0.15 N.A. 1.19 3.73 1.10 6.93 2.21 2.60 1.30 4.45 1.59 4.87 6.61 0.89 (29.47) 0.27 1.42 1.59 4.06 2.83 2.65 0.92 5.06 0.20 3.20 7.26 1.79 (25.74) 0.18 0.74 1.41 1.57 3.10 3.87 1.14 4.09 2.25 2.33 8.18 3.69 (10.86) 0.06 0.70 1.31 0.35 3.43 2.46 1.05 5.66 2.56 2.52 7.17 5.51 N.A. June 2012 0.09 0.09 0.03 0.02 2.96 2.25 3.85 15.50 June 2012 June 2012 June 2012 June 2012 June 2012 0.30 0.13 0.27 0.38 0.11 0.40 0.23 0.07 0.55 0.04 0.51 0.21 0.18 0.39 0.09 0.46 0.17 0.28 0.28 0.05 1.16 0.14 2.21 3.60 3.92 1.68 (6.04) 2.42 2.12 3.66 1.56 (1.73) 2.06 2.92 4.26 1.92 9.12 2.24 3.79 4.25 March 2012 0.03 0.09 0.17 0.16 3.65 1.22 0.87 1.28 June 2012 June 2012 June 2012 June 2012 N.A. 0.19 0.91 0.19 N.A. 0.09 0.82 0.04 N.A. 0.31 0.77 0.09 N.A. 0.12 0.79 0.44 0.65 3.08 6.16 3.46 (10.45) 1.80 7.33 5.13 2.81 13.62 8.72 6.24 1.80 1,381.70 7.94 5.77 June 2012 0.13 0.14 0.16 0.14 5.21 3.35 3.67 3.17 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 Dec. 2011 June 2012 0.19 0.25 0.55 0.29 0.24 0.26 1.00 0.25 0.14 0.22 0.20 0.37 0.35 0.32 0.14 0.25 0.95 0.22 0.14 0.29 0.20 0.28 0.42 0.23 0.26 0.26 0.00 0.25 0.07 0.44 0.24 0.22 0.53 0.28 0.12 0.26 0.01 0.40 N.A. 0.46 4.92 2.49 2.61 3.20 4.30 3.54 21.79 0.89 1.31 5.34 5.06 1.77 1.94 4.21 4.33 8.14 9.72 0.92 0.78 5.74 4.39 2.71 3.09 4.78 4.14 6.53 0.93 0.45 1.41 5.40 N.A. 2.48 3.05 4.62 4.22 13.56 (2.35) 0.74 N.A. 5.77 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 June 2012 0.47 218 0.10 0.18 0.20 0.93 1.00 0.01 0.49 N.A. 0.19 0.69 0.67 208 0.01 0.10 0.39 0.26 1.00 0.01 0.30 0.46 0.20 0.79 0.62 41 0.03 0.06 0.42 0.14 1.00 0.01 0.43 0.31 0.20 0.64 0.81 50 0.02 0.06 0.48 0.23 1.00 0.01 0.18 0.30 0.24 0.93 1.04 5.71 1.67 0.40 8.00 (0.12) 4.28 0.64 0.84 N.A. 4.92 0.40 2.48 4.01 2.40 1.19 5.61 (0.27) 6.05 0.59 1.22 3.85 5.06 0.36 2.04 2.55 3.82 0.86 4.92 (0.48) 16.96 1.51 2.15 4.94 4.39 0.81 2.27 2.39 3.46 0.41 4.95 (0.37) 27.35 1.31 3.04 7.83 N.A. 0.67 2012a 2012a a LTM. N.A. Not applicable. Source: Fitch Ratings. Latin America High Yield November 8, 2012 13 Corporates AES Andres Dominicana, Ltd. (AES Dominicana) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term Issuer Default Rating Senior Unsecured B B Rating Outlook Long-Term Foreign Currency Issuer Default Rating Positive Financial Data AES Andres Dominicana Ltd. (USD Mil.) Total Assets Total Equity Net Income EBITDA Total Debt LTM 3/31/12 935,575 612,299 78,316 173,436 164,076 12/31/11 880,405 605,815 85,611 183,411 164,012 High Risk Sector: The Dominican Republic power sector is characterized by low collections from end users and high electricity losses. Such conditions have undermined distribution companies’ (DISCOs) cash flow generation, leaving them dependent on government subsidies to honor their accounts payable to the Dominican generation companies. This links the credit quality of the distribution and generation companies in the country to that of the sovereign. Transition Risk Diminishes: The incumbent party’s electoral victory in the presidential elections held during May 2012 partially diminishes the political uncertainty that had prevailed during the first half of the year. For AES Dominicana, the results lowered the risk of noncontinuous policies aimed at strengthening the financial viability of the Dominican electricity sector, as agreed to under the last IMF Standby agreement that expired in February 2012. Key political measures needed to achieve a financially viable sector in the medium term include a gradual adjustment to tariffs, increases in the DISCOs’ cash recovery index (CRI) to 70% from the historical lows of 50%, and the reduction of days receivables from generating companies to a 60-day average. Solid Portfolio of Assets: AES Dominicana’s ratings reflect its high quality assets, consisting of Andres and DPP. These plants have an aggregate generating capacity of 540 MW. Andres ranks among the lowest cost electricity generators in the country. Its combined-cycle plant burns natural gas and is expected to be fully dispatched as a base-load unit as long as the liquefied natural gas (LNG) price is not more than 15% higher than the price of imported fuel oil No. 6. Well Structured PPAs: The company’s operating profits are healthy due to well-structured U.S. dollar-denominated power purchase agreement (PPA) with EDE Este, a Dominican distribution company. The increase in the participation of nonregulated users in its client base and its income diversification strategy, which is achieved through incremental sales of natural gas also support the ratings. AES Dominicana owns the only LNG import terminal in the country with a storage and daily transportation capacity of 160,000 m3 and 6,000 m3 respectively. Strong Stand-Alone Credit Profile: AES Dominica has a strong standalone credit profile for the rating category. The company generated USD173 million of EBITDA during the LTM ended March 31, 2012. Its EBITDA margin was 37.6%. With only USD168 million of total debt, AES Dominicana’s leverage, as measured by total debt to EBITDA, is low at 0.9x. Analysts Julio Ugueto +58 212 286-3356 julio.ugueto@fitchratings.com Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Volatile Cash Flow Generation: Annualized CFFO was USD45 million as of March 31, 2012, well below the CFFO during fiscal 2011 of USD63 million, showing relative deterioration in account receivable collections from distribution companies during the first quarter of 2012 (58%) with respect to the fiscal 2011 collection performance of 70%. Still, the company shows strong liquidity with cash on hand of USD128 million as of March 31, 2012 and no short-term debt. Debt service coverage with respect to EBITDA stood at a strong 9.7x. What Could Trigger a Rating Action Drivers: Lower dependence of the sector on government subsidies could lead to a rating upgrade. The ratings would also be positively affected by a positive rating action on the sovereign. Latin America High Yield November 8, 2012 14 Corporates Recovery Analysis AES Dominicana’s senior notes issuance has been assigned a recovery rating of ‘RR4’. The recovery was based upon the treatment of AES Dominicana as a going concern, as a liquidation scenario is considered highly unlikely. The ratings have been capped at ‘RR4’ due to concerns about the low probability of high recoveries for bondholders of corporates domiciled in the Dominican Republic. Fitch currently maintains a positive outlook for the sovereign, and, as such, we do not foresee a bankruptcy scenario for AES Dominicana unless a low probability event, such as a severe fiscal crisis that impacts the company’s cash flow to a point that its liquidity is constrained. As a result we have opted for estimating a distressed enterprise valuation to arrive at the recovery scenario attached below. The distressed EBITDA is calculated to cover the company’s fixed charges and critical maintenance capex, which is then adjusted by a conservative 5x multiple to arrive at a distressed company valuation. This distressed valuation would be associated with a severe fiscal crisis that would lead to a sustained cash flow drain for all generating companies in the country and contemplates the low probability event of a nonfriendly renegotiation scenario of the company’s PPA’s with distribution companies to the detriment of AES Dominicana. In this hypothetical scenario, it would be reasonable to expect a low demand for the company’s assets under a competitive bidding process, further supporting the distressed valuation commented above. Recovery Analysis AES Dominicana (USD Mil.) IDR: Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Distressed EBITDA Multiple (x) Going Concern Enterprise Value B 173.4 83.9 28.0 5.0 140.0 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 18 — 10 Distribution of Value by Priority Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 140.0 14.0 126.0 Distribution of Value Secured Priority Senior Secured Secured Unsecured Priority Issuer Default Rating Senior Unsecured Subordinated Junior Subordinated Lien — — Amount Outstanding — 164 — — Value Recovered — — Value Recovered — 126 — — Recovery (%) — — Recovery (%) — 77 — — Concession Allocation (%) — — — — Recovery Rating — — Recovery Rating — RR2 — — Notching — — Notching — +2 — — Rating — — Rating B BB– — — Source: Fitch. Latin America High Yield November 8, 2012 15 Corporates Organization Structure — AES Dominicana The AES Corporation IDR — B+ (100% Equity Owner) AES Andres BV Dominican Power Partners Operating Subsidiary Operating Subsidiary (100% Equity Owner) AES Andres Dominicana LTD IDR — B Senior Unsecured Debt Outstanding (USD Mil.) 168 Source: AES Dominicna. Latin America High Yield November 8, 2012 16 Corporates Debt and Covenant Synopsis AES Andres Dominicana LTD. (AES Dominicana) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt AES Andres Dominicana AES Andres B.V. & Dominican Power Partners Nov. 12, 2010 Nov. 12, 2020 Senior Unsecured Notes Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) (x) Interest Coverage (Minimum) (x) 3.5 2.25 Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Intercompany Loans Restriction on Purchase of Notes Change of control clause at 101% of principal. Generally permits asset sales as long as it is divested at least equal to fair market value, the company receives at least 75% cash payment and the proceeds are used to reduce debt or are reinvested. The issuer is not allowed to incur additional debt. The guarantor is not allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. The guarantors can incur additional indebtedness in an aggregate principal amount not to exceed USD30 million. AES Dominican’s guarantors’ are not permitted to issue senior secured debt or to create any lien on any asset, property, or income without providing the same security to the existing notes. The issuer is not permitted to pay any dividends or make any other distribution to its shareholders, except for dividends payable solely in their capital stock. The guarantors are not permitted to make any restricted payments if, among other clauses, it cannot incur additional debt according to its limitation on indebtedness, an event of default has occurred, or if such payment exceeds 100% of combined net income. None. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Events of default include but are not limited to: breach of any covenant, if the interest reserve is not fully funded for more than fifteen days and if the issuer, either guarantor or any restricted subsidiary, defaults in any indebtedness of at least USD20.0 million. As of March 31, 2011, AES Andres had USD413 million of intercompany subordinated debt with its shareholder that amortizes Dec. 31, 2016. This debt accrues interest at an annual rate of 9.125%, which can be paid under certain conditions, or else capitalized at December 31 of each year. The issuer is allowed to redeem the notes in whole or in part at a preset redemption price. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 17 Corporates Financial Summary AES Andres Dominicana Ltd. (USD Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 173,436 173,436 38 38 9 (4) 26 183,411 183,411 41 41 14 0 15 161,900 161,900 43 43 13 21 19 82,438 82,438 35 35 7 (3) 1 112,253 112,253 31 31 9 (5) 5 3.9 9.7 9.7 9.7 9.7 3.9 (0.1) 7.0 1.5 6.4 10.9 10.9 10.9 10.9 6.4 0.9 8.7 2.2 4.4 7.8 7.8 7.8 7.8 4.4 4.9 10.7 7.6 1.9 3.4 3.4 2.8 2.8 1.9 0.6 2.8 0.7 2.9 5.6 5.6 2.5 2.5 2.9 0.0 0.9 (1.7) 2.4 0.9 0.2 0.9 0.2 0.2 — — 1.5 0.9 0.2 0.9 0.2 0.1 — — 1.8 1.0 0.3 1.0 0.3 0.3 — — 3.5 2.0 1.2 2.0 1.2 0.1 — 0.0 3.1 1.6 1.3 1.6 1.3 0.1 — 0.1 935,575 127,703 — 164,076 164,076 — 164,076 — 164,076 612,299 776,375 880,405 131,130 — 164,012 164,012 — 164,012 — 164,012 605,815 769,827 853,356 119,652 — 163,773 163,773 — 163,773 — 163,773 559,193 722,966 713,062 63,040 5,000 156,000 161,000 — 161,000 — 161,000 458,304 619,304 718,418 40,450 25,000 156,000 181,000 — 181,000 — 181,000 454,676 635,676 51,802 (6,460) 45,342 — (29,742) (35,903) (20,303) — 7,978 2 — (1,045) (13,368) 90,649 (27,823) 62,826 — (28,617) (35,903) (1,694) — 14,179 7 — (1,014) 11,478 70,285 22,857 93,142 — (12,273) — 80,869 — (16,277) (3,492) — (3,279) 57,821 20,957 (3,616) 17,341 — (23,479) — (6,138) — 51,571 (20,000) — (1,286) 24,147 37,850 (49,343) (11,493) — (6,743) — (18,236) — 12,155 9,596 — (1,473) 2,042 461,351 4 146,515 17,872 — 78,316 444,386 18 157,343 16,800 — 85,611 376,738 0151 135,414 20,625 — 53,823 234,536 (35) 66,900 24,399 — 3,493 358,249 26 97,500 19,910 — 21,378 Source: Fitch. Latin America High Yield November 8, 2012 18 Corporates Alto Palermo S.A. (APSA) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B+/RR3 Local Currency Long-Term IDR BB– IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR RWN Long-Term Local Currency IDR Stable RWN – Rating Watch Negative. Financial Data Alto Palermo S.A. (USD Mil.) Revenue EBITDA Cash Flow from Operations (CFFO) Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) CFFO/Net Debt (x) 6/30/12 214.7 165.5 6/30/11 214.1 147.7 143.3 130.0 31.1 172.5 41.8 147.6 0.8 1.0 0.7 1.3 0.7 1.2 Linkage to IRSA and Argentina: While debt at Alto Palermo S.A. (APSA) is low in relation to cash flow, Fitch Ratings has linked the credit quality of APSA with its more highly leveraged parent company, IRSA Inversiones y Representaciones S.A. (IRSA). APSA’s foreign currency IDR continues to be constrained at ‘B’ by the ‘B’ country ceiling assigned to Argentina by Fitch. Its local currency (LC) issuer default rating (IDR) is constrained at ‘BB–’ due to the high degree of risk associated with operating in Argentina’s real estate industry. Devaluation Risk: Devaluation risk is also present for APSA as most of its cash flow is denominated in Argentine pesos and a substantial part of its debt is in U.S. dollars. This risk is partially mitigated by APSA’s dollar-denominated asset portfolio and its long-term debt profile. Strong Business Position: APSA’s ‘BB–’ LC IDR is supported by the company’s strong market position in the Argentine shopping center industry. APSA operates 13 shopping centers with a gross leasable space of 309,021 square meters. The high quality of these malls and their strategic locations result in sales per square meter that exceed the market average and occupancy rates of more than 98%. Hedge Against Consumer Inflation: APSA’s revenues are partially hedged against consumer inflation, as the company receives a percentage of the sales made by tenants of its malls. The company’s high operating margins are due to leases that result in the tenants paying direct expenses and a percentage of the common expenses. Cyclical Business: APSA’s results are closely correlated with the performance of the economy, which has proven to be quite volatile. APSA shows some concentration in the nearterm for its lease agreements (33% of lease contracts expiring in 2013), as the contracts are generally for 36 months. While this ratio is high for the industry, APSA’s strong market position allows it to renew contracts updating leasing terms. Diversified Asset Base: For the real estate industry, the emphasis of Fitch's methodology is on portfolio quality and diversity, and size of the asset base. APSA’s portfolio of assets is strong, with an undepreciated book capital as of June 30, 2012 of USD629 million. These assets are mostly unencumbered, as secured debt represents less than 5% of total debt. The company’s leverage, as measured by net debt as a percentage of undepreciated book capital, was 17% as of June 30, 2012. This percentage would be even lower at market values. The large pool of unencumbered assets at APSA provides financial flexibility and results in aboveaverage recovery prospects in the event of default. What Could Trigger a Rating Action Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Jose Vertiz +1 212 908-0641 jose.vertiz@fitchratings.com Latin America High Yield November 8, 2012 Changes Affecting APSA’s Conservative Financial Structure: The Stable Outlook reflects Fitch’s expectations that APSA will manage its balance sheet to a targeted ratio of debt-toEBITDA of about 1.5x and interest coverage to be above 5.0x. Fitch estimates that the company’s EBITDA margin will remain above 70%. Any significant increase in APSA’s targeted leverage ratio would threaten credit quality and could result in a negative rating action. Changes in Argentina’s Country Ceiling: APSA’s foreign currency (FC) IDR would be affected by an upgrade or downgrade of the Argentine country ceiling of ‘B’. 19 Corporates Recovery Rating The recovery ratings for APSA’s capital market debt instruments reflect Fitch’s expectation that the company’s creditors would have above-average recovery prospects in the event of a default. The recovery analysis anticipates a complete recovery for senior unsecured bond holders. The notching was capped at ‘RR3’, which resulted in a one-notch uplift from the FC IDR. The notching above the soft cap of ‘RR4’ for bonds issued by Argentine corporates reflects the company’s very strong credit profile and its ability to continue to operate should a potential economic and political crisis occur in Argentina. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 4.0x distressed EBITDA multiple, which is consistent with the value observed on the Buenos Aires stock exchange during the last year. Recovery Analysis Alto Palermo S.A. (APSA) (USD Mil.) Going Concern Enterprise Value June 30, 2012 FYE EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 165.5 25 124.1 4.0 496.5 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Liquidation Value Cash A/R Inventory Net PPE Total 31.1 57.0 1.7 349.7 439.5 Advance Rate 0 80 50 20 Available to Creditors — 45.6 0.9 69.9 116.4 16.2 — 8.2 24.4 496.5 49.7 446.9 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 446.9 — 446.9 22.3 424.5 Distribution of Value Value Recovery Recovered Recovery (%) Rating Notching Rating — — — — — Value Concession Recovery Unsecured Priority Lien Recovered Recovery (%) Allocation (%) Ratinga Notching Rating Senior Unsecured 172.4 172.4 100 100 RR3 +1 B+/RR3 a In accordance with Fitch Ratings’ country-specific treatment of recovery ratings, the recovery ratings of Argentine corporates are capped at ‘RR4’. The strong profile of APSA has resulted in its one-notch rating uplift from the ‘RR4’ threshold. Note: Numbers may not add due to rounding. Source: Fitch Ratings. Secured Priority Senior Secured Latin America High Yield November 8, 2012 Lien — 20 Corporates Organizational Structure — Alto Palermo S.A. Summary Statistics LTM June 30, 2012 Alto Palermo S.A. USD120 Million Senior Unsecured Notes due 2017 USD165.5 Million of EBITDA USD31.1 Million of Cash and Marketable Securities USD140.7 Million of Total Debt Rents and Services Other Consumer Financing 100% Patio Bullrich 20% Tarshop 100% Torodur S.A. 100% Alto Avellaneda 95% Apsamedia 100% Patio Olmos 100% Paseo Alcorta 100% Torres Rosario Abasto 100% 100% Espacio Aereo Coto/Soleil 100% Alto Rosario 100% Alto NOA 100% Alto Palermo 100% Mendoza Plaza 100% Shopping Villa Cabrera 53.68% ERSA 80% PAMSA 98.14% Shopping Neuquen 99.99% FIBESA S.A. 100% 88.18% 50% Arcos del Gourmet Nuevo Puerto Santa Fe Other 100% 100% 100% Buenos Aires Design DOT Proyecto Neuquen Soleil Factory Source: Fitch and Alto Palermo S.A.’s public information. Latin America High Yield November 8, 2012 21 Corporates Debt and Covenant Synopsis Alto Palermo S.A. (APSA) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Leverage (Maximum) Alto Palermo S.A. N.A. April 20, 2007 2017; Notes issued under USD400 million program Senior Unsecured Notes N.A. Interest Coverage (Minimum) N.A. Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Change-of-control clause at 101% of principal. See Limitations on Consolidation or Mergers or Assets Sale Debt Restriction Additional Debt Restriction Limitation on Liens Restricted Payments Other Limits on Consolidations or Mergers or Assets Sale Transactions with Affiliates The issuer is not allowed to incur additional debt except permitted debt, unless the consolidated interest coverage exceeds 1,75x. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations; guarantees; derivatives as long as used for hedging purposes; debt to finance the acquisition of assets related to the core business of the company, as long as it is below 5% of total consolidated tangible assets; debt related to labor claims; short term bank debt related to the normal course of business. The issuer shall not assume any lien upon its assets (with the exception of 'permitted liens') unless at the same time the obligations of the company under the notes are secured equally. With several exceptions, the issuer and restricted subsidiaries are prohibited from making certain investments, including the acquisitions of stocks, bonds, and notes under certain conditions. Restrictions on merger or consolidation of issuer. Exceptions include: 1) the merger of other entities with the issuer provided that surviving entity will be the issuer; 2) if any entity formed by such merger is organized and validly under existing laws, and the surviving entity assumes responsibility towards the debt service of the existing notes. Transactions with affiliates are permitted as long as the terms of the transaction are not substantially less favorable than those that could be achieved with a non-related party. This limitation does not apply to certain transactions with subsidiaries; management, directors and other fees; loans to directors, employees or any subsidiary, that are related to the core business and do not exceed USD1 million. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Alto Palermo’s public information and Fitch Ratings. Latin America High Yield November 8, 2012 22 Corporates Financial Summary — Alto Palermo S.A. (APSA) Period-End Exchange Rate 4.5238 4.1100 3.9317 3.799 3.0235 3.0905 Average Exchange Rate 4.3012 3.9998 3.8458 3.7279 3.1247 3.0861 2012 2011 2010 2009 2008 2007 165,548 77.1 43.2 31.3 32.4 147,754 69.0 39.3 26.0 26.1 114,622 56.2 20.2 1.8 12.9 49,202 28.5 17.3 (34.6) (2.2) 76,548 37.4 17.6 (24.9) 8.6 72,630 46.4 13.7 (5.3) 7.4 10.0 10.2 10.2 4.8 4.8 10.0 2.4 3.3 7.9 7.9 7.2 7.2 3.0 3.0 7.9 1.5 2.4 10.1 3.8 5.0 5.0 1.5 1.5 3.8 0.4 0.6 2.3 4.3 2.8 2.8 0.6 0.6 4.3 (0.5) (0.3) 0.3 5.6 4.9 4.9 1.4 1.4 5.6 (0.7) 1.1 0.6 6.7 7.2 7.2 2.0 2.0 6.7 0.0 4.3 1.1 0.9 0.8 0.7 0.8 0.7 9.2 — 0.1 0.9 1.0 0.7 1.0 0.7 10.1 — 0.2 2.0 1.5 1.4 1.5 1.4 9.8 — 0.2 2.6 4.0 3.7 4.0 3.7 7.0 — 0.3 2.4 2.7 1.5 2.7 1.5 6.2 0.0 0.1 3.0 2.7 0.6 2.7 0.6 6.2 0.0 0.1 550,063 31,124 18,172 154,290 172,462 31,769 140,693 0 140,693 215,852 356,546 565,931 41,814 29,590 149,757 179,347 31,755 147,592 0 147,592 254,296 401,888 631,928 17,527 51,963 172,481 224,444 47,220 177,224 0 177,224 244,501 421,725 645,305 16,988 62,075 182,188 244,263 47,203 197,060 0 197,060 233,855 430,915 738,248 95,213 38,293 219,051 257,344 47,252 210,092 0 210,092 306,319 516,411 677,467 159,227 27,137 219,625 246,762 47,266 199,496 0 199,496 289,706 489,202 145,850 (2,502) 143,349 0 (18,081) (58,079) 67,189 0 (40,376) (36,645) 631 (470) (9,671) 141,845 (11,790) 130,055 0 (12,920) (61,473) 55,662 0 (896) (31,935) 202 0 23,034 63,872 (31,296) 32,576 0 (13,997) (14,862) 3,716 0 17,481 (21,456) 1,412 0 1,154 58,359 (35,411) 22,948 0 (66,360) (16,159) (59,571) 0 (17,535) 8,718 12,886 0 (55,501) 72,078 (18,279) 53,799 0 (86,463) (18,270) (50,934) 0 (22,555) (3,607) 6,998 0 (70,097) 57,051 1,182 58,233 0 (51,137) (15,419) (8,323) 0 (8,544) 155,908 0 0 139,041 214,735 0.3 138,799 16,165 76,221 214,128 4.9 118,414 20,488 65,148 204,086 18.4 83,338 23,048 30,969 172,366 (15.9) 24,203 17,627 (5,918) 204,869 30.8 51,912 15,701 25,593 156,583 30.0 50,075 10,024 20,757 (USD 000, Fiscal Years Ended June 30) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/(Interest Expense + Rental Expenses) Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow (FCF) Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income Source: Fitch and Alto Palermo S.A.’s public information. Latin America High Yield November 8, 2012 23 Corporates Financial Summary — Alto Palermo S.A. (APSA) (ARS 000, Fiscal Years Ended June 30) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/(Interest Expense + Rental Expenses) Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 2012 2011 2010 2009 2008 2007 712,053 77.1 43.2 31.3 32.4 590,985 69.0 39.3 26.0 26.0 440,814 56.2 20.2 1.8 12.9 183,421 28.5 17.3 (34.6) (2.4) 239,191 37.4 17.6 (24.9) 8.8 224,144 46.4 13.7 (5.3) 7.4 10.0 10.2 10.2 4.7 4.7 10.0 2.4 3.3 7.9 7.9 7.2 7.2 2.9 2.9 7.9 1.5 2.3 10.1 3.8 5.0 5.0 1.5 1.5 3.8 0.4 0.6 2.3 4.3 2.8 2.8 0.6 0.6 4.3 (0.5) (0.3) 0.3 5.6 4.9 4.9 1.5 1.5 5.6 (0.7) 1.1 0.6 6.7 7.2 7.2 2.0 2.0 6.7 0.0 4.3 1.1 0.9 0.9 0.7 0.9 0.7 9.2 0.0 0.1 0.9 1.0 0.7 1.0 0.7 10.1 0.0 0.2 2.1 1.6 1.4 1.6 1.4 9.8 0.0 0.2 2.6 4.1 3.7 4.1 3.7 7.7 0.0 0.3 2.3 2.7 1.5 2.7 1.5 6.4 0.0 0.1 3.0 2.8 0.6 2.8 0.6 6.2 0.0 0.1 2,488,374 140,801 82,206 697,979 780,185 143,717 636,468 0 636,468 976,473 1,612,941 2,325,978 171,856 121,615 615,503 737,118 130,515 606,603 0 606,603 1,045,155 1,651,758 2,484,550 68,910 204,303 678,145 882,448 185,653 696,795 0 696,795 961,303 1,658,098 2,451,515 64,537 235,824 692,134 927,958 179,324 748,634 0 748,634 888,417 1,637,051 2,232,093 287,875 115,778 662,302 778,080 142,865 635,215 0 635,215 926,156 1,561,371 2,093,711 492,092 83,868 678,752 762,620 146,076 616,544 0 616,544 895,336 1,511,879 627,331 (10,760) 616,571 0 (77,769) (249,810) 288,992 0 (173,667) (157,616) 2,716 (2,023) (41,598) 567,352 (47,159) 520,193 0 (51,676) (245,879) 222,638 0 (3,582) (127,734) 808 0 92,130 245,639 (120,360) 125,279 0 (53,829) (57,158) 14,292 0 67,229 (82,515) 5,432 0 4,438 217,555 (132,008) 85,547 0 (247,384) (60,238) (222,075) 0 (65,367) 32,499 48,039 0 (206,904) 225,223 (57,116) 168,107 0 (270,171) (57,088) (159,152) 0 (70,477) (11,272) 21,868 0 (219,033) 176,064 3,648 179,712 0 (157,815) (47,584) (25,687) 0 (26,368) 481,148 0 0 429,093 923,618 7.8 597,003 69,527 327,842 856,468 9.1 473,631 81,949 260,578 784,873 22.1 320,500 88,638 119,102 642,565 0.4 90,227 65,713 (22,060) 640,154 32.5 162,208 49,061 79,970 483,231 33.7 154,538 30,935 64,057 Source: Fitch and Alto Palermo S.A.’s public information. Latin America High Yield November 8, 2012 24 Corporates Arcor S.A.I.C. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B+ B+/RR4 Local Currency Long-Term IDR BB– IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Arcor S.A.I.C. (USD Mil.) Revenue EBITDA Cash Flow from Operations (CFFO) Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) CFFO/Net Debt (x) IFRS 3/30/12 253.3 30.1 Local GAAP 12/31/11 3.051.6 257.3 7.7 161.7 25.5 420.5 98.8 446.9 3.5 1.7 3.3 12.8 1.4 0.5 Strong Business Position: Arcor S.A.I.C.’s (Arcor) ‘BB–’ local currency issuer default rating (IDR) reflects the company’s strong business position as a leading Latin American producer of confectionary and cookie products. Arcor enjoys strong brand equity in Argentina due to its comprehensive distribution network and its presence in the country for more than 60 years. Foreign Currency IDR Above Country Ceiling: Arcor’s presence extends beyond Argentina due to exports to 120 countries and its production facilities in Chile, Brazil, Mexico, and Peru. Arcor’s exports and operations outside of Argentina (30% of total consolidated revenues) partially mitigate the risks of foreign exchange controls in Argentina. They have resulted in a foreign currency IDR of ‘B+’ for Arcor, which is one notch higher than the ‘B’ country ceiling that Fitch has assigned to Argentina. Cash Flow Concentration in Argentina: Arcor’s ‘BB–’ local currency IDR considers the high correlation of its cash flow with the Argentine economic cycle. While Arcor’s operations in investment-grade countries such as Brazil and Chile account for nearly 30% of its consolidated revenues, the contribution to cash flow generation from operations in these countries is still low. About 85% of Arcor’s operating cash flow is generated in Argentina. Ample Liquidity and Low Leverage: The company generated a positive cash flow from operations of USD161 million during 2011 and had cash and equivalents of USD99 million. As of Dec. 31, 2011, Arcor’s short-term debt was USD160 million. Funds from operations adjusted leverage decreased to 1.4x from 1.9x in Dec. 31, 2010. Cash flow is generally high in relation to capital expenditures and consistently maintains a positive trend. What Could Trigger a Rating Action Changes Affecting Financial Structure: The Stable Outlook reflects Fitch’s expectations that Arcor will manage its balance sheet to a targeted debt-to-EBITDA ratio of around 2.0x. Under a conservative scenario, Fitch estimates the company’s interest coverage to be more than 4.0x. A significant increase in Arcor’s targeted leverage ratio would weaken credit quality and could result in a negative rating action. Conversely, the local currency IDR could be positively affected by a better than expected cash flow generation or better than expected operating results from subsidiaries in investment-grade countries. Changes in Argentina’s Country Ceiling: Arcor’s foreign currency IDR could be affected by an upgrade or downgrade of Argentina’s ‘B’ country ceiling. Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Latin America High Yield November 8, 2012 25 Corporates Recovery Rating Arcor’s recovery rating of ‘RR4’ indicates that the company’s creditors would have an average recovery prospect in the range of 31%−50% of current principal and related interest in the event of default. This rating reflects a recovery rating cap for Argentine issuers of ‘RR4’. Fitch has estimated the enterprise valuation in the event of financial distress. This analysis considers that any debt default by Arcor would likely be the result of the imposition of foreign exchange or transfer controls and that the company’s operations would remain viable. As a result, Fitch has not performed a liquidation analysis in the event of bankruptcy. The bespoke recovery analysis of Arcor’s debt suggests recovery levels consistent with the ‘RR1’ category. Recovery Analysis ARCOR S.A.I.C. (USD Mil.) IDR: Going Concern Enterprise Value EBITDA as of Dec. 31, 2011 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value B+ 257 25 193 6.0 1,158 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 42.3 — 30.0 72.3 Distribution of Value Secured Priority Senior Secured Secured Lien 5.0 — Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecureda Unsecured Subordinated Junior Subordinated Lien 413.6 0.0 0.0 0.0 Recovery (%) 100 — Value Recovered 5 — Recovery Rating RR1 — Notching Rating B+ — — — — — — — Value Recovered 413.6 — — — Recovery (%) 100 0 0 0 Concession Allocation (%) 100 0 0 0 Recovery Rating RR1 — — — Notching — — — Rating B+ — — — a The recovery ratings of Argentine corporates are soft capped at ‘RR4’. Source: Fitch. Latin America High Yield November 8, 2012 26 Corporates Organizational Structure — Arcor S.A.I.C. Grupo Arcor S.A. Others 0.3% 99.7% December 2011 – Summary Statistics: Arcor S.A.I.C. USD257.3 Mil. of EBITDA USD98.8 Mil. of Cash and Marketable Securities USD446.8 Mil. of Total Debt TD/EBITDA: 1.7x ND/EBITDA: 1.4x 51.00% 99.98% Arcor do Brasil TD: USD33.1 Mil. TD: USD387.6 Mil. 99.99% Bagley Latinoamerica 99.29% 99.99% Bagley Argentina Bagley do Brasil TD: USD3.7 Mil. Ind. Alim. DEU 99.99% Bagley Chile 99.99% 99.99% Cartocor TD: USD4.2 Mil. 99.98% Cartocor Chile TD: USD5.9 Mil. La Campagnola TD: USD5.6 Mil. 99.00% Converflex Arg. 99.99% Unidad Mexico 50.00% Mundo Dulce TD –Total debt. ND – Net debt. Source: ARCOR S.A.I.C and Fitch. Latin America High Yield November 8, 2012 27 Corporates Debt and Covenant Synopsis — Arcor S.A.I.C. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Arcor S.A.I.C. N.A. Oct. 26, 2010 2017 Senior Unsecured Notes Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) N.A. N.A. Acquisitions/Divestitures Change of Control Provision Limitation on Sale of Restricted Subsidiaries Debt Restriction Additional Debt Restriction Other Transactions with Affiliates Sale and Leaseback Transactions Change of control clause at 101% of principal. The company will not and will not permit any restricted subsidiary transfer, convey, lease, sell, or dispose of any voting stock of any restricted subsidiary, except: to the company or to other restricted subsidiary; in compliance with covenants Limitation on Sales of Assets, Limitation on Restricted Payments. The company will not and will not permit any restricted subsidiary to incur in any indebtedness (other than Permitted Debt). Exceptions are: 1) on the date of such incurrence, the fixed charge coverage ratio would be no less than 3x and 2) no default or event of default shall have occurred. The company will not and will not allow its restricted subsidiaries to enter into a transaction with affiliates, unless: 1) the transaction is on terms that are no less favorable than those that would have been obtained in a comparable transaction with a Person that is not an affiliate; 2) the company delivers to the trustee for transactions in excess of USD15 million, a resolution from its board of directors. The company or its restricted subsidiaries will not enter into any sale and lease back transactions unless pursuant to the provisions of the covenant described under 'limitation on Indebtedness'. FQE – Fiscal quarter-end. FYE – Fiscal year-end. N.A. – Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 28 Corporates Financial Summary Arcor S.A.I.C. (USD 000, As of Dec. 31) Period-End Exchange Rate Average Exchange Rate Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) FCF Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/(Interest Expense + Rental Expenses) Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.3786 4.2098 4.3053 4.1295 3.9787 3.9134 3.7990 3.7279 3.4538 3.1631 LTM 3/31/12 2011 2010 2009 2008 30,067 — 11.9 — — — — 257,266 257,266 8.4 0.1 28.4 (0.3) 19.8 195,213 195,213 7.5 7.5 24.3 (0.1) 18.8 212,969 212,969 9.9 9.9 30.2 7.7 16.4 209,562 209,562 9.3 9.3 22.1 0.5 11.6 2.5 2.1 — 0.3 — 2.5 0.3 0.4 1.2 — 2.9 3.5 3.3 — — 13.4 — 0.4 7.5 6.2 6.2 1.3 1.3 7.5 0.2 0.7 1.3 — 1.4 1.7 1.4 1.7 1.4 0.1 — 0.4 8.2 6.2 6.2 1.1 1.1 8.2 0.2 1.3 1.7 — 1.9 2.5 1.6 2.5 1.6 6.9 — 0.3 9.0 6.2 6.2 1.0 1.0 9.0 0.9 1.8 7.4 — 1.4 2.0 1.1 2.0 1.1 8.0 — 0.4 6.5 5.8 5.8 0.9 0.9 6.5 0.2 0.6 1.5 — 1.9 2.1 1.6 2.1 1.6 8.9 — 0.4 1,182,687 25,549 164,216 256,256 420,472 — 420,472 0 420,472 546,061 966,533 1,624,727 98,813 159,814 287,054 446,868 — 446,868 0 446,868 602,404 1,049,272 1,595,457 189,194 139,003 355,437 494,440 — 494,440 0 494,440 560,462 1,054,902 1,378,776 185,098 177,286 238,068 415,354 — 415,354 0 415,354 580,076 995,430 1,339,669 92,213 188,174 245,486 433,660 — 433,660 0 433,660 530,193 963,853 21,866 (14,163) 7,703 0 (6,319) 0 1,384 98 (10,417) 1,451 — 0 (7,485) 268,865 (107,141) 161,724 0 (129,327) (41,424) (9,027) 26,813 (3,408) (80,425) (13,238) 0 (79,284) 228,911 (115,089) 113,822 0 (68,229) (47,643) (2,051) 3,456 363 49,190 (38,301) 0 12,658 272,439 (56,792) 215,647 0 (29,286) (20,387) 165,975 3,082 (6,460) (57,145) (2,528) 0 102,924 196,890 (110,175) 86,715 0 (56,286) (19,518) 10,912 3,187 1,580 31,956 (1,401) 0 46,235 253,229 0.0 26,114 14,529 0 32,560 3,051,623 18.0 210,253 41,538 0 115,226 2,586,336 19.9 151,151 31,614 0 107,048 2,156,440 -4.4 165,121 34,104 0 91,117 2,256,580 20.8 151,844 35,851 0 61,708 Source: Fitch. Latin America High Yield November 8, 2012 29 Corporates Financial Summary Arcor S.A.I.C. (ARS 000, As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) FCF Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/ (Interest Expense + Rental Expenses) Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 131,042 131,042 11.9 — — — — 1,062,379 1,062,379 8.4 0.1 28.4 (0.3) 19.7 763,947 763,947 7.5 7.5 24.3 (0.1) 18.9 793,928 793,928 9.9 9.9 30.2 7.7 16.8 662,866 662,866 9.3 9.3 22.1 0.5 11.1 2.5 2.1 — 0.3 — 2.5 0.3 0.4 1.2 7.5 6.2 6.2 1.2 1.2 7.5 0.2 0.7 1.3 8.2 6.2 6.2 1.1 1.1 8.2 0.2 1.3 1.7 9.0 6.2 6.2 1.0 1.0 9.0 0.9 1.8 7.4 6.5 5.8 5.8 0.9 0.9 6.5 0.2 0.6 1.5 2.9 3.5 3.3 — — 13.5 — 0.4 1.5 1.8 1.4 1.8 1.4 0.1 — 0.4 1.9 2.6 1.6 2.6 1.6 7.0 — 0.3 1.4 2.0 1.1 2.0 1.1 8.3 — 0.4 2.0 2.3 1.8 2.3 1.8 8.5 — 0.4 5,178,515 111,870 719,038 1,122,042 1,841,080 — 1,841,080 — 1,841,080 2,390,981 4,232,061 6,994,938 425,420 688,048 1,235,853 1,923,901 — 1,923,901 — 1,923,901 2,593,529 4,517,430 6,347,845 752,746 553,052 1,414,176 1,967,228 — 1,967,228 — 1,967,228 2,229,910 4,197,138 5,237,969 703,188 673,508 904,420 1,577,928 — 1,577,928 — 1,577,928 2,203,710 3,781,638 4,626,948 318,484 649,916 847,859 1,497,775 — 1,497,775 — 1,497,775 1,831,179 3,328,954 95,302 (61,730) 33,572 — (27,541) — 6,031 429 (45,403) 6,322 — — (32,621) 1,110,279 (442,438) 667,841 — (534,055) (171,061) (37,275) 110,726 (14,072) (332,114) (54,668) — (327,403) 895,819 (450,390) 445,429 — (267,006) (186,448) (8,025) 13,525 1,422 192,500 (149,887) — 49,535 1,015,626 (211,714) 803,912 — (109,175) (76,000) 618,737 11,490 (24,083) (213,030) (9,425) — 383,689 622,784 (348,495) 274,289 — (178,037) (61,737) 34,515 10,081 4,998 101,081 (4,430) — 146,245 1,103,672 — 113,814 63,322 — 141,909 12,601,676 24.5 868,240 171,531 — 475,824 10,121,366 25.9 591,514 123,719 — 418,922 8,038,991 12.6 615,556 127,136 — 339,676 7,137,788 22.6 480,298 113,399 — 195,189 Source: Fitch. Latin America High Yield November 8, 2012 30 Corporates Arendal, S. de R.L. de C.V. (Arendal) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR B Local Currency Long-Term IDR B IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Arendal, S. de R.L. de C.V. (MXN Mil.) Total Debt Revenue EBITDA EBITDA Margin (%) Total Debt/ EBITDA (x) EBITDA/Interest Expenses (x) LTM 6/30/12 510 2,477 498 20.1 12/31/11 492 1,263 255 20.2 1.0 1.9 6.2 5.6 Recent Ratings Upgrade: Arendal, S. de R.L. de C.V.’s ratings were upgraded on Sept. 7, 2012 to reflect its strengthened credit profile due to an improvement in its main credit metrics associated with higher operating and EBITDA margins, which in turn were translated into positive cash flow from operations in the last 30 months, as well as positive free cash flow generation in the last 18 months. During 2011 and 2012, Arendal has been developing the construction of a federal penitentiary in the state of Chiapas, which has diversified the company’s revenue source, as well as allowed it to increase operative margins compared to past years. Nevertheless, Fitch Ratings expects that margins will decline in 2013 and 2014 due to the nature of future projects. The ratings are limited by industry factors, which are highly linked to economic cycles, project concentration of revenues and cash flow, as well as the current process to strengthen corporate governance practices. Small Company with Volatile Liquidity Position: Arendal is a relatively small company that makes fluid transportation systems and plants in Mexico’s heavy construction industry. The company’s financial strategy is to secure its debt with the cash from projects, resulting in almost all of its debt concentrated in the short term. This makes the company’s ability to continue to operate highly dependent on management’s efforts to obtain new projects and financing. Tight liquidity also heightens the risk of mismanaging working capital. Industry Constraints: Fitch believes Mexico’s heavy construction industry is exposed to economic cycles, which is reflected in the volatility of sales and operating margins throughout the years. Arendal’s main long-term challenge is the ongoing need to add new projects. Underdeveloped Corporate Governance: Fitch believes that Arendal’s corporate governance is below average due to issues such as: the participation of key executives in business operations, a lack of independent members in the board of directors, and alternative overseeing committees, as well as multiple related-party transactions. Stable Profitability: During the last five years, the company has grown organically through the cycle. Revenues reported by the company in 2011 were MXN1.3 billion, and operating income was MXN237 million. The compounded annual growth rate (CAGR) of revenues and operating income during the last five years were 17% and 52%, respectively. These factors reflect management’s commitment and ability to adjust its operating and business strategies despite an unfavorable economic environment. What Could Trigger a Rating Action Stronger Credit Metrics and Liquidity: A combination of stronger credit metrics, an improved liquidity position, and better corporate governance could lead to a positive rating action. Analysts Indalecio Riojas +52 81 8399-9100 indalecio.riojas@fitchratings.com Alberto de los Santos +52 81 8399-9100 alberto.delossantos@fitchratings.com Latin America High Yield November 8, 2012 Weak Operating Performance: The ratings could be negatively pressured by a combination of the following factors, among others: deterioration of Arendal’s credit metrics as a result of a downturn in the heavy construction industry or a decline in its operative performance. Large scale projects that are more complex and not in Arendal’s current areas of expertise could demand additional resources from the company than originally anticipated. A rating downgrade could also be driven by limited access to financing sources affecting the company’s liquidity position. 31 Corporates Organizational Structure — Arendal, S. de R.L. de C.V. (MXN Million, As of June 30, 2012) Arendal, S. de R.L. de C.V. Foreign Currency IDR — B Local Currency IDR — B Credit Facilities for Projects Financial Leases Total Debt 76.0% MAKOBIL, S. de R.L. de C.V. 99.9% ARB Arendal Servicios, S.A. de C.V. 501.3 8.7 510.0 99.9% ARB Arendal Construcciones, S.A. de C.V. 99.9% Aspica, S. de R.L. de C.V. These three companies provide and manage the personnel services to the sites and corporate offices. Source: Company reports and Fitch estimates. Latin America High Yield November 8, 2012 32 Corporates Axtel S.A.B. de C.V. Full Rating Report Key Rating Drivers Ratings Foreign Currency Local Currency Senior Unsecured National B– B– B–/RR4 BB–(mex) Rating Watch Foreign Currency Long-Term Rating Negative Local Currency Long-Term Rating Negative National Long-Term Rating Negative Financial Data Axtel S.A.B. de C.V. (MNX Mil.) 6/30/12 12/31/11 Revenue Operating EBITDAR Operating EBITDAR/ Revenues (%) FFO Cash Flow from Operations FCF FFO/Interest Expense Net of Interest Income (x) Total Debt Total Adjusted Debt with Equity Credit Total Adjusted Debt/Operating EBITDAR (x) Adjusted Leverage/FFO (x) Operating EBITDAR/Debt Service Coverage (x) 10,672 3,866 10,829 4,142 30.7 1,948 38.3 2,349 1,660 (606) 2,312 (220) 2.8 11,923 3.3 12,511 16,663 17,054 4.3 4.1 4.6 4.4 1.9 2.1 High Leverage: Fitch Ratings downgraded Axtel on June 24, 2012, reflecting the pressure over the company’s leverage due to weak operating performance, which resulted in leverage increasing above Fitch’s previous expectation of 3.5x. Fitch expects a total debt-to-EBITDA ratio of around 4.0x by year end. Changes in leverage should be linked either to the MXN fluctuation or to operating issues. Underperforming Long-Distance Continues: The decrease in international long-distance (ILD) service prices and volumes continue to affect revenue and EBITDA generation. ILD services are expected to remain under pressure. The company continues making an effort to mitigate the impact to EBITDA generation by adjusting their 2012 capex to close to USD150 million from USD190 million. Recapitalization Options: The company announced that it is exploring different alternatives to improve its financial position. Among them are the sale of noncore assets, including the sale and leaseback of towers, an increase in capital, and a joint venture in a particular business. In the short term, it is likely that efforts should be centered on the sale of noncore assets. Strategy Focused on Broadband and ICT Services: Axtel’s strategy aims to strengthen its service portfolio with a bundle offering of high-end broadband to both residential and corporate customers, as well as Information and Communications Technology (ICT) services to both users. Axtel seeks to mitigate voice revenue reduction and strengthen its competitive position by increasing EBITDA generation from the corporate segment, which is less competitive than the residential market. Weakened Liquidity Position: Axtel’s liquidity position has weakened but is partially offset by its manageable debt maturity profile, as its next sizeable maturity is in 2017. As of June 30, 2012, the company had a cash balance of MXN693 million, down from MNX1,425 million for year-end 2011. This cash position compares to short-term maturities of MXN355 million and LTM FFO of MXN2,750 million. If the company manages to reduce debt, cash flow that was used for debt service and payments can be used for capex. Favorable Regulatory Rulings: Recent regulatory rulings have favored Axtel’s cost structure. Nevertheless, ILD prices were down more than expected during the first quarter of 2012, affecting operating results. Axtel has a disagreement regarding mobile interconnection rates with Telcel and international long-distance settlements with Telmex that could result in a liability to Axtel of MXN3,219 million. A negative outcome may result in a nonrecurring expense for Axtel and could negatively affect its credit quality. What Could Trigger a Rating Action Analysts Sergio Rodriguez, CFA +52 81 8399-9100 sergio.rodriguez@fitchratings.com Natalia O’Byrne +57 1 326-9999 natalia.obyrne@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: The Negative Rating Watch is pending on the result of Axtel’s success in divesting noncore assets. If successful, the proceeds will be used primarily for payment of onbalance sheet debt and, to a lesser extent, for capital expenditures. The inability to improve its liquidity position or stabilize operating performance, or a MXN devaluation that results in total debt to EBITDA approaching 4.5x, could also result in further negative rating actions. 33 Corporates Recovery Analysis ‘RR4’ rated securities have characteristics consistent with securities, historically recovering 31%–50% of current principal and related interest, which is average given default. Recovery Analysis Axtel S.A.B. de C.V. (MXN Mil.) IDR: B– Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 3,274.20 50 1,637.10 3.0 4,911.30 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 1,062 592 — 1,654 Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 693.6 2,486.10 124.4 14,934.7 18,238.8 Advance Available to Rate (%) Creditors 0 — 80 1,988.90 50 62.2 20 2,986.9 5,038 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 5,038.00 503.80 4,534.20 Distribution of Value Secured Priority Senior Secured Secured Lien 0 0 Value Recovered 0 0 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 4,534.2 — 4,534.2 226.7 4,307.5 Unsecured Priority Senior Unsecured Unsecured Value Recovered — 4,307.5 Lien 0.0 11,923.3 Recovery (%) 0 0 Recovery (%) 0 36 Concession Allocation (%) 100 0 Recovery Rating 0 0 Notching 0 0 Recovery Rating — RR4 Notching — 0 Rating 0 0 Rating — B– Source: Fitch. Latin America High Yield November 8, 2012 34 Corporates Organizational Structure — Axtel S.A.B. de C.V. and Subsidiaries (MXN Mil.) Consolidated Debt EBITDA Debt to EBITDA (x) Instalaciones Contrataciones, S.A. de C.V. 11,923 3,274 3.6 Servicios Axtel, S.A. de C.V. Axtel S.A.B. de C.V. Avantel, S. de R.L. de C.V. Avantel Infraestructura S. de R.L. de C.V. Telecom Network, Inc. Source: Fitch and Axtel. Latin America High Yield November 8, 2012 35 Corporates Debt and Covenant Synopsis Axtel S.A.B. de C.V. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Axtel S.A.B. de C.V. — 9/22/09 9/22/19 Senior Unsecured Notes guaranteed by all subsidiaries with the exception of Telecom Networks. Consolidated Leverage (Maximum) The company and the subsidiary guarantors consolidated leverage ratio cannot exceed 4.0 to 1.0. Acquisitions/Divestitures Change of Control Upon the occurrence of any a change of control event, each holder of the notes shall have the right to require that Axtel repurchase the notes Provision at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest. The purchase date shall be no earlier than 30 days or later than 60 days from the date of the notice. Events considered a change of control are: (1) any “person,” other than one or more permitted holders, is or becomes the beneficial owner such person shall be deemed to have “beneficial ownership” of all shares that any such person has the right to acquire, whether this right is exercisable immediately or only after the passage of time and such person shall not be deemed to have “beneficial ownership” of any shares solely as a result of a voting or similar agreement entered into in connection with a merger agreement or asset sale agreement), directly or indirectly, of more than 35% of the total voting power of Axtel’s voting stock. (2) Individuals who on Sept. 22, 2009 constituted the board of directors cease for any reason to constitute a majority of the board of directors. (3) The adoption of a plan relating to the liquidation or dissolution of Axtel. (4) The merger or consolidation of the Axtel with or into another person or the merger of another person with or into Axtel, or the sale of all or substantially all the assets of the company to another Person other than a transaction in which holders of securities that represented 100% of the Voting Stock of the company. Sale of Assets Restriction Axtel will not, and will not permit any restricted subsidiary to, directly or indirectly, consummate any asset disposition unless: (1) the company or such restricted subsidiary receives consideration at the time of such asset disposition at least equal to the fair market value, as determined in good faith by the Board of Directors, of the shares and assets subject to such asset disposition; (2) except in the case of a permitted asset swap, at least 75% of the consideration thereof received by the Axtel or such restricted subsidiary is in the form of cash or cash equivalents; and (3) an amount equal to 100% of the net available cash from such asset disposition is applied by the company to prepay, repay, redeem, purchase, defease or otherwise acquire senior indebtedness of Axtel or indebtedness or repay any Indebtedness that was secured by the assets sold in such asset disposition, in each case within one year from the later of the date of such asset disposition or the receipt of such net available cash, to the extent the company elects, to acquire additional assets within one year from the later of the date of such asset disposition or the receipt of such net available cash or to make an offer to the holders of the notes and to holders of other senior indebtedness of Axtel to purchase the notes. Certain Covenants Limitation on Liens Axtel will not, and will not permit any restricted subsidiary to, directly or indirectly, incur or permit to exist any lien of any nature whatsoever on any of its properties, whether owned at Sept. 22, 2009 or thereafter acquired, securing any indebtedness, other than permitted liens, without effectively providing that the notes shall be secured equally and ratably with the obligations so secured for so long as such obligations are so secured. Limitation in The company will not, and will not permit any restricted subsidiary to, incur, directly or indirectly, any indebtedness; provided, however, that Indebtedness Axtel and the subsidiary guarantors will be entitled to incur indebtedness if, on the date of such Incurrence and after giving effect thereto on a pro forma basis the consolidated leverage ratio would be less than 4.0 to 1. Notwithstanding the company and the restricted subsidiaries will be entitled to incur any or all of the following Indebtedness: (1) indebtedness owed to and held by the company or a wholly owned subsidiary; (2) the existing notes, other than any additional notes; (3) indebtedness outstanding on Sept.22, 2009; (4)refinancing indebtedness in respect of indebtedness incurred, (5) hedging obligations consisting of interest rate agreements directly related to indebtedness or hedging obligations relating to currency agreements, (6) Obligations in respect of performance, bid and surety bonds and completion guarantees provided by Axtel or any restricted subsidiary in the ordinary course of business, (7) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; (8) purchase money obligations and capital lease obligations, in an aggregate principal amount at any time outstanding not exceeding an amount equal to 10% of consolidated total assets; (9) indebtedness consisting of the subsidiary guaranty of a subsidiary guarantor and any guarantee by a subsidiary guarantor of indebtedness incurred to the extent the refinancing indebtedness incurred there under directly or indirectly refinances indebtedness incurred; (10) indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets provided that (a) any amount of such obligations included on the face of the balance sheet of the company or any restricted subsidiary shall not be permitted under this clause and (b) in the case of a disposition, the maximum aggregate liability in respect of all such obligations outstanding under this clause shall at no time exceed the gross proceeds actually received; and (11) indebtedness of the company or of any of its restricted subsidiaries in an aggregate principal amount which, when taken together with all other indebtedness of the company and its restricted subsidiaries outstanding on the date of such incurrence does not exceed USD30 million. Limitation on Sale and Axtel will not, and will not permit any restricted subsidiary to, enter into any sale/leaseback transaction with respect to any property unless: (1) Leaseback the company or such restricted subsidiary would be entitled to (a) incur indebtedness in an amount equal to the attributable debt with respect to such sale/leaseback transaction pursuant to the covenant described under “Limitation on Indebtedness” and (b) create a lien on such property securing such attributable debt without equally and ratably securing the notes pursuant to the covenant described under “Limitation on Liens”; (2) the net proceeds received by the company or any restricted subsidiary in connection with such sale/ leaseback transaction are at least equal to the fair market value of such property; and (3) the Axtel applies the proceeds of such transaction in compliance with the covenant described under “Limitation on Sale of Assets and Subsidiary Stock.” N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 36 Corporates Debt and Covenant Synopsis Axtel S.A.B. de C.V. (Continued) (Foreign Currency Notes) Certain Covenants (Continued) Limitation on Sale of Axtel will not, and will not permit any restricted subsidiary to, sell, lease, transfer or otherwise dispose of any capital stock of any restricted Assets and Subsidiary subsidiary to any person (other than the company or a wholly owned subsidiary), and will not permit any restricted subsidiary to issue any of its Stock capital stock (other than, if necessary, shares of its Capital Stock constituting directors’ or other legally required qualifying shares) to any person (other than to the company or a wholly owned subsidiary). Limits on Consolidations Axtel will not consolidate with or merge with or into, or convey, transfer, or lease, in one transaction or a series of transactions, directly or or Mergers indirectly, all or substantially all its assets to, any person, unless: (1) the resulting, surviving or transferee person or “Successor Company” shall be a person organized and existing under the laws of the United Mexican States or the laws of any political subdivision thereof, the laws of the United States of America, any State thereof or the District of Columbia, or the European Union or any of its member nations and the successor company (if not the company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the trustee, in form satisfactory to the trustee, all the obligations of the predecessor company under the notes and the Indenture; (2) immediately after giving pro forma effect to such transaction (and treating any Indebtedness which becomes an obligation of the successor company or any subsidiary as a result of such transaction as having been Incurred by such successor company or such subsidiary at the time of such transaction), no default shall have occurred and be continuing; (3) immediately after giving pro forma effect to such transaction, the successor company would be able to incur an additional US$1.00 of indebtedness pursuant to paragraph (a) of the covenant described under “Limitation on Indebtedness”; (4) the company shall have delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the indenture; (5) the company shall have delivered to the trustee an opinion of counsel to the effect that the holders will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such transaction and will be subject to U.S. Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred; and (6) Axtel shall have delivered an opinion of counsel in the United Mexican States to the effect that the holders will not recognize income gain or loss for income tax purposes of such jurisdiction as a result of such transaction and will be subject to income tax in such jurisdiction on the same amounts, in the same manner and at the same times as would have been the case if such transaction had not occurred. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 37 Corporates Financial Summary Axtel S.A.B. de C.V. (MXN 000, As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 3,274,188 3,866,664 30.7 36.2 16.4 (5.7) (39.6) 3,574,585 4,142,481 33.0 38.3 17.2 (2.0) (30.3) 3,227,780 3,746,515 30.3 35.2 15.7 (10.5) (3.6) 3,838,580 4,322,519 35.0 39.4 19.7 (5.6) 2.2 4,210,402 4,624,745 36.4 40.0 21.6 (0.5) (8.4) 2.8 3.1 2.3 2.3 1.9 2.2 0.3 0.8 0.7 3.3 3.6 2.6 2.6 2.1 2.5 0.6 1.6 0.9 3.2 3.5 2.6 2.0 1.8 2.4 (0.1) 0.7 0.7 4.1 4.1 3.1 2.1 1.8 3.1 0.2 0.9 0.8 5.1 5.3 3.8 3.8 3.1 3.7 0.7 1.7 1.0 4.6 3.6 3.4 4.3 4.1 9.7 — 3.0 4.4 3.5 3.1 4.1 3.8 8.7 — 3.0 4.2 3.2 2.8 3.9 3.5 9.2 — 6.3 3.2 2.6 2.2 3.2 2.9 9.5 — 9.5 2.9 2.3 2.0 2.8 2.6 9.3 — 3.1 21,194,428 693,593 355,810 11,567,479 11,923,289 — 11,923,289 4,739,808 16,663,097 5,322,286 21,985,383 22,277,272 1,425,023 380,880 12,130,494 12,511,374 — 12,511,374 4,543,168 17,054,542 5,740,146 22,794,688 22,408,580 1,308,264 655,996 9,772,835 10,428,831 — 10,428,831 4,149,880 14,578,711 7,734,294 22,313,005 21,603,082 1,402,240 944,553 8,947,650 9,892,203 — 9,892,203 3,871,512 13,763,715 8,200,933 21,964,648 21,569,161 1,105,576 296,106 9,358,464 9,654,570 — 9,654,570 3,314,744 12,969,314 7,931,417 20,900,731 1,948,914 (288,465) 1,660,449 0 (2,267,415) 0 (606,966) 0 (73,921) 229,981 0 (891,109) (1,342,015) 2,349,429 (36,724) 2,312,705 0 (2,532,772) 0 (220,067) 0 (81,185) 260,904 0 (1,024,460) (1,064,808) 2,049,242 194,221 2,243,463 0 (3,361,220) 0 (1,117,757) 0 (103,191) 1,088,282 0 38,690 (93,976) 2,909,459 (846,435) 2,063,024 0 (2,674,436) 0 (611,412) 0 (326,603) 777,967 219,662 58,629 118,243 3,295,568 647,383 3,942,951 0 (4,000,615) 0 (57,664) 0 (19,267) 215,842 (277,666) (27,973) (166,728) 10,672,129 (0.9) 209,369 1,062,071 592,476 (2,571,236) 10,829,405 1.7 437,487 1,002,580 567,896 (2,042,922) 10,651,961 (2.9) 240,783 933,347 518,735 (286,029) 10,968,877 (5.2) 772,782 925,261 483,939 176,400 11,572,401 (5.1) 1,354,563 801,687 414,343 (700,324) Source: Fitch. Latin America High Yield November 8, 2012 38 Corporates Bio PAPPEL S.A.B de C.V. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B IDR Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Bio Pappel S.A.B. de C.V. (MXN Mil.) Revenue EBITDA Total Debt Gross Interest Expense Debt/EBITDA (x) EBITDA/ Gross Interest Expense (x) LTM 6/30/12 12,023 964 3,389 2011 11,008 769 3,939 302 3.5 284 5.1 3.2 2.7 Note: LTM 2Q12 data is LTM IFRS. Leading Market Position: Bio PAPPEL S.A.B de C.V. (Bio-PAPPEL) is the largest paper and packaging company in Mexico with some operations in the U.S., and 1.3 million tons of sales during 2011. The main paper and packaging products manufactured and sold by Bio-PAPPEL are corrugated containers, containerboard, newsprint, multiwall sacks and bags, uncoated free sheet paper, and kraft paper. As the largest producer of these products in Mexico, the company has a diversified customer base. Weak Debt Repayment Record: Bio-PAPPEL has restructured its debt twice over the last 12 years (in 2002 and 2008). A key driver of these debt restructurings was the company’s vulnerability to high costs for raw materials and energy. While the company has made efforts to improve its cost structure and decrease its vulnerability to costs that are outside of its control, Bio-PAPPEL is currently vulnerable to rising recycled fiber prices, as well as those for electricity and natural gas. Mixed Operating Environment: The global economic environment during the past few years has resulted in relatively high energy and recycled fiber prices, while the Mexican economy has performed relatively well. The confluence of these factors has translated into a stable performance by Bio-PAPPEL’s packaging division and a rebound in the performance of its paper division. Combined, these factors have led to growth in the company’s EBITDA to MXN935 million for the LTM ended June 30, 2012 from a low of MXN285 million during 2008. At the end of June 2012, Bio-PAPPEL had MXN1.1 billion of cash and marketable securities and MXN3.4 billion of total debt. Financing of Customers: Many of Bio-PAPPEL’s customers are small and are not able to obtain financing from banks at attractive rates and terms. As a result, the company tends to have very large account receivables balances relative to EBITDA, as it essentially acts as a lender for some of its customers. What Could Trigger a Rating Action Diminishing the Debt Burden: A positive factor for credit quality would be a reduction of the issuer’s debt burden, which could reduce leverage variability under changing EBITDA levels. Stabilizing Price Cost Spread: The successful widening and stabilization of the spread between price and cost per ton, thus making EBITDA generation more constant, would be positive for creditworthiness. Conversely, a consistent weakening of the price versus cost unit spread would be considered negative for credit quality. Analysts Miguel Guzman Betancourt +52 81 8399-9100 miguel.guzman@fitchratings.com Alberto de los Santos +52 81 8399-9100 alberto.delossantos@fitchratings.com Latin America High Yield November 8, 2012 39 Corporates Recovery Rating Because of the issuer’s restructuring track record, we do not envision a liquidation scenario for Bio-PAPPEL in the event of financial distress. Consequently, a liquidation analysis was not performed. The most likely scenario would be a negotiated restructuring of the debt, as was done in 2002 and 2008. In deriving a distressed enterprise valuation to determine the recovery under this scenario, we discounted the company’s LTM EBITDA to historical lows, which in the past have triggered restructuring efforts. We then applied a 6x distressed EBITDA multiple, which is conservative for the industry and reflects the harsh industry environment that would result in restructuring proceedings. Recovery Analysis Bio-PAPPEL S.A.B de C.V. (MXN Mil.) IDR: Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value B 964.3 70 289.3 6.0 1,735.7 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 284.2 — 65.0 349.2 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 1,735.7 173.6 1,562.1 Recovery Rating RR3 RR3 Rating B+ B+ Distribution of Value Secured Priority Senior Secured Secured Lien 120.7 258.1 Value Recovered 120.7 258.1 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 1,562.1 378.8 1,183.3 59.2 1,124.2 Unsecured Priority Senior Unsecured Value Recovered 1,183.3 Lien 3,010.5 Recovery (%) 100 100 Recovery (%) 39 Concession Allocation (%) 100 Notching +1 +1 Recovery Rating RR4 Notching 0 Rating B Source: Bio-PAPPEL S.A.B de C.V. Latin America High Yield November 8, 2012 40 Corporates Organizational Debt Structure — Bio Pappel S.A.B. de C.V. (As of 2Q12) Bio Pappel, S.A.B. de C.V. Senior Notes due 2016 Bancomer Notes Payable GE 99.96% Porteadores de Durango, S.A. de C.V. MXN2,970 Mil. MXN40 Mil. MXN221.3 Mil. MXN119 Mil. 99.99% Bio Servicios Corporativos, S.A. de C.V. Bio Pappel Nacional, S.A. de C.V. 99.99% Reciclajes Centauro, S.A. de C.V. 99.62% 99.99% Bio Pappel Packaging, S.A. de C.V. GE MXN1.3 Mil. Notes Payable MXN36.5 Mil. 99.7%a 52.64%b Bio Servicios Printing, S.A. de C.V. Bio Pappel International Inc. Notes Payable MXN0.3 Mil. Lineas Aéreas Ejecutivas de Durango, S.A. de C.V. Bio Pappel Inmobiliaria, S.A. de C.V. 99.99% Bio Servicio de Empaques, S.A. de C.V. 99.99% Bio Servicios de Papel Kraft, S.A. de C.V. Bio Pappel Printing, S.A. de C.V. 99.99% 100.00% 99.99% a0.3% is controlled through Bio-Pappel. b47.35 % is controlled through Bio Pappel Nacional. Source: Bio Pappel S.A.B. de C.V. Latin America High Yield November 8, 2012 41 Corporates Debt and Covenant Synopsis — Bio-PAPPEL, S.A.B. de C.V. (As of Dec. 31, 2009) Overview Issuer Guarantors Corporación Durango, S.A.B. de. C.V. (renamed Bio Pappel, S.A.B. de C.V.) Each direct and indirect subsidiary of Bio Pappel, S.A.B. de. C.V. including: Porteadores de Durango, S.A. de C.V., Reciclajes Centauro, S.A. de C.V., Administración Corporativa de Durango, S.A. de C.V. (“ACD”) (renamed Bio Servicios Corporativos, S.A. de. C.V.) Líneas Aéreas Ejecutivas de Durango, S.A. de C.V. Empaques de Cartón Titán, S.A. de C.V. (“Titán”) (renamed Bio Pappel Packaging, S.A. de C.V.) Inmobiliaria Industrial Tizayuca, S.A. de C.V. (renamed Bio Pappel Inmobiliaria, S.A. de C.V.) Servicios Industriales Tizayuca, S.A. de C.V. (merged into Bio Servicios de Papel Kraft, S.A. de C.V.) Atenmex, S.A. de C.V., Atensa, S.A. de C.V. (merged into Bio Servicios de Papel Kraft, S.A. de C.V.) Ectsa Industrial, S.A. de C.V. (renamed Bio Servicios de Empaques, S.A. de C.V.) Eyemsa Industrial, S.A. de C.V. (merged into Bio Servicios de Empaques, S.A. de C.V.) Cartonpack Industrial, S.A. de C.V. (“Cartónpack”) (merged into Bio Servicios de Empaques, S.A. de C.V.) Administración Industrial Centauro, S.A. de C.V. (merged into Bio Servicios de Papel Kraft, S.A. de C.V.) Administradora Industrial Durango, S.A. de C.V. (renamed Bio Servicios de Papel Kraft, S.A. de C.V.) Ponderosa Industrial de México, S.A. de C.V. (“PIMSA”) (recently sold) Mexpape, S.A. de C.V. (renamed Bio Servicios Printing, S.A. de C.V.) Fapatux, S.A. de C.V. (merged into Bio Pappel Printing, S.A. de C.V.), Servicios Pipsamex, S.A. de C.V. (merged into Bio Servicios Printing, S.A. de C.V.) Formatodo Industrial, S.A. de C.V. (merged into Bio Servicios Printing, S.A. de C.V.) Paper International, Inc. (merged into Bio Pappel International, Inc.) Fiber Management of Texas, Inc. (merged into Paper International, Inc which was later merged into Bio Pappel International, Inc.) Grupo Pipsamex, S.A. de C.V. (renamed Bio Pappel Printing, S.A. de. C.V.) McKinley Paper Company (renamed Bio Pappel International, Inc.) Summafibers Inc. (merged into Bio Pappel International, Inc.) Empresas Titán, S.A. de C.V. (merged into Bio Pappel Packaging, S.A. de. C.V.) Compañía Norteamericana de Inversiones en Celulosa y Papel, S.A. de C.V. (merged into Bio Pappel Inmobiliaria, S.A. de C.V.) Aug. 27, 2009 Aug. 27, 2016 Senior Guaranteed Notes Document Date Maturity Date Description of Debt Financial Covenants Consolidated Leverage (Maximum) N.A. Interest Coverage (Minimum) N.A. Acquisitions/Divestitures Change-of-Control Provision Change-of-control clause at 101% of principal. Sale of Assets Restriction Neither the issuer nor guarantors can sell assets other than: 1) worn or obsolete assets with an aggregate value of less than USD100,000; 2) asset sales in the ordinary course of business; or 3) asset sales in which the net proceeds are used to repay the notes. If the issuer or the guarantors sell capital stock of their subsidiaries, the net proceeds must be used to repay the notes. A fairness opinion is needed if an equity issuance or asset sale of capital stock of a note issuer involves more than 5% of its capital stock, or if more than 1% if the capital stock is sold to an affiliate, obligor, or other related entity of any guarantor. Debt Restrictions Additional Debt Restriction Neither the issuer nor guarantors are allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. The issuer or its subsidiaries can incur or maintain up to USD30 million of additional indebtedness through 2012. This figure then escalates annually, reaching USD60 million by 2016. (Debt thresholds shall not be cumulative.) Debt can also be incurred for finance trade receivables in connection with hedging agreements and in respect to certain intercompany loans under certain conditions. Limitation on Secured Debt Beyond customary permitted liens, subject to certain conditions, Durango or its subsidiaries may incur liens: 1) securing permitted indebtedness provided that liens in respect of such refinanced debt existed prior to such refinancing and do not extend beyond the collateral securing such debt prior to its refinancing, 2) arising out of letters of credit, or 3) arising out of the sale of goods; 4) statutory liens; 5) arising from ordinary course transactions and activities. Restricted Payments With certain exceptions, the issuer or guarantors are prohibited from making certain investments, including the acquisitions of stocks, bonds, and notes, as well as the making of deposits or loans with certain defined persons and entities. The investment restrictions also identify certain financial instruments that the company can invest in, such as commercial paper of highly rated entities. N.A. Not applicable. Continued on next page. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 42 Corporates Debt and Covenant Synopsis — Bio PAPPEL, S.A.B. de C.V. (Continued) Other Cross Default Acceleration Cross default when an uncured event of default occurs for debt of more than USD10 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. Holders of the majority of the outstanding notes may rescind a declaration of acceleration within 60 days. PIK Interest Rate The interest rate for notes is 6% during the first year, 7% during years two through four, and 10% during the fifth, sixth, and seventh year. During the first two years, 3% of the coupon can be paid with a PIK coupon, and during the third year 2% of the coupon can be paid with a PIK coupon. Intercompany Loans Intercompany loans are subordinated. Restriction on Purchase of The issuer, guarantor, or affiliates may purchase notes at par provided the notes shall be retired or pledged. Notes purchased shall have no Notes voting rights to the extent permitted by law in bankruptcy or any other situation. Transactions with Affiliates Transactions between issuer or guarantors and affiliates for more than USD100,000 shall require a fairness opinion. Limits on Consolidations or Restrictions on merger or consolidation of issuer and guarantors. Exceptions include: 1) the merger of guarantors; 2) the merger of other Mergers entities with the issuer provided that surviving entity will be the issuer or another corporation existing under the laws of Mexico or the U.S., and that no event of default occurs or is continuing, the company’s pro forma net worth increases, and that the company’s debt be rated at least ‘B+’ prior to the merger and is affirmed at ‘B+’ or higher; or 3) the merger of other entities with a guarantor provided that surviving entity will be the guarantor or another corporation existing under the laws of Mexico or the U.S., that no event of default occurs or is continuing, the company’s pro forma net worth increases, and that the company’s debt rating be at least ‘B+’ prior to the merger and is affirmed at ‘B+’ or higher. Any surviving entity would assume all obligations of the issuer or guarantor under the indenture. Mandatory Redemption The note will be redeemed on a pro rata basis if an issuer or guarantor sells assets with a value of at least USD5 million or greater than USD10 million during a 180-day period through a series of lesser sales. Notes will also be automatically redeemed if equity is issued, using 85% of net cash proceeds. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 43 Corporates Financial Summary — Bio PAPPEL, S.A.B. de C.V. (MXN Mil.) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debta Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income IFRS LTM 6/30/12 2011 Mexican GAAP 2010 2009 964,281 1,127,882 8.0 9.4 11.4 4.6 (1.7) 768,597 911,763 7.0 8.3 7.1 0.7 (0.9) 1,004,078 1,252,024 8.9 11.1 9.9 (1.6) 4.6 931,953 1,148,881 9.1 11.2 7.4 4.0 28.7 285,061 462,754 2.8 4.5 9.8 (2.4) (62.2) 5.1 3.2 2.4 2.3 1.9 3.7 2.0 4.6 2.0 2.8 2.7 2.1 1.9 1.6 2.2 0.9 3.2 1.2 4.6 4.2 2.6 3.1 2.2 2.8 0.2 2.4 0.7 6.8 8.4 3.5 6.1 3.1 3.0 3.4 9.8 3.2 1.4 0.4 0.5 0.0 0.1 1.3 0.1 0.2 (0.6) 2.6 3.5 2.4 4.0 3.0 9.9 0.0 0.0 5.2 5.1 3.9 5.4 4.4 7.8 0.0 0.0 3.8 3.4 2.7 4.1 3.5 7.1 0.0 0.0 5.1 3.6 2.6 4.3 3.4 2.1 0.0 0.0 7.6 25.4 22.7 18.3 16.7 10.2 0.0 1.0 16,649,218 1,094,455 118,338 3,270,949 3,389,287 0 3,389,287 1,145,207 4,534,494 9,102,457 13,636,951 16,387,047 966,970 125,944 3,813,312 3,939,256 — 3,939,256 1,002,162 4,941,418 8,548,715 13,490,133 16,036,596 734,802 81,475 3,314,383 3,395,858 — 3,395,858 1,735,622 5,131,480 8,531,632 13,663,112 15,009,789 977,874 42,101 3,356,487 3,398,588 — 3,398,588 1,518,496 4,917,084 8,164,089 13,081,173 15,465,831 773,086 7,094,194 151,743 7,245,937 — 7,245,937 1,243,851 8,489,788 2,911,181 11,400,969 1,247,299 (170,630) 1,076,669 910,457 (529,138) 0 547,531 38,790 87,795 (12,346) 0 (245,994) 415,776 523,466 (39,982) 483,484 0 (404,688) 0 78,796 37,151 1,603 (9,511) 0 124,129 232,168 860,879 (360,489) 500,390 0 (687,194) 0 (186,804) 4,348 (4,282) (808) 0 (55,526) (243,072) 645,114 (45,533) 599,581 0 (189,864) 0 409,717 2,015 (1,042) (100,680) (6,782) (98,440) 204,788 260,830 (354,961) (94,131) 0 (155,787) 0 (249,918) 377,747 51,855 (185,612) 151,154 87,296 232,522 12,022,597 0.0 650,716 301,565 163,601 (153,196) 11,008,110 (2.8) 406,254 284,496 143,166 (73,207) 11,321,693 10.1 674,850 240,617 247,946 385,781 10,287,521 0.7 567,726 111,431 216,928 1,587,859 10,217,378 0.9 (111,092) 677,121 177,693 (2,544,262) 2008 a Off-balance sheet debt based on gross rental expense (see Related Criteria). Source: Fitch. Latin America High Yield November 8, 2012 44 Corporates Cablevision S.A. Full Rating Report Key Rating Drivers Negative Outlook: Fitch Ratings revised Cablevision S.A.’s Rating Outlook to Negative from Stable on July 5, 2012. The Negative Outlook stems from a weakening of the company’s operating position as a result of restrictions on the import of key products and materials. As a result of the weak operating environment, Cablevision has limited headroom to improve its operational performance. Fitch believes that the company’s credit quality is likely to come under pressure should the unfavorable regulatory and operating environment persist. Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B+ IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR RWN Long-Term Local Currency IDR Negative RWN – Rating Watch Negative. Financial Data Cablevision S.A. (USD Mil.) Revenue EBITDA Cash Flow from Operations Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) 3/31/12 12/31/11 (3 Months) (12 Months) 411 1,523 135 478 78 323 156 648 125 489 1.2 1.0 0.9 0.8 Note: Cablevision changed to IFRS in January 2012. Figures as of March 2012 are three-month figures. Ratios have been calculated by annualizing income statement and cash flow items. Related Criteria Corporate Rating (August 2012) Methodology Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers (August 2012) Rating Global Telecom Companies (September 2011) Analysts Cecilia Minguillon +54 11 5235-8123 cecilia.minguillon@fitchratings.com Alberto Moreno +54 11 5235-8129 alberto.moreno@fitchratings.com Latin America High Yield November 8, 2012 Conservative Leverage Is a Key Credit Consideration: Fitch expects that the company will maintain a conservative capital structure to mitigate existing operational and regulatory risks. As of March 31, 2012, Cablevision’s total consolidated debt was USD648 million, similar to year-end 2011, with a manageable maturity schedule. In the short term, the restrictions to trade would cause credit protection metrics to strengthen, as capex is delayed from previous forecasts, with net leverage trending below 1.0x and gross leverage around 1.5x. High Regulatory and Political Risk Among Others: Fitch believes the weak and hostile regulatory framework has prevented the company from achieving its goals in terms of service clustering and triple-play offering. This has affected Cablevision’s business model and growth potential. Other credit concerns include the evolving competitive landscape, costs pressures derived from double-digit inflation, and currency mismatch between Cablevision’s pesodenominated cash flow generation and its dollar-denominated debt. Cablevision’s foreign currency issuer default rating is capped by Argentine’s country ceiling of ‘B’, while its Recovery Rating of ‘RR4’ is constrained by the soft cap of ‘RR4’ for bonds issued by Argentine corporates. Competitive Position Could Be Affected: Cablevision’s solid business position is derived from a comparatively stronger subscriber clustering profile and service penetration rates. The company’s ability to maintain its competitive position relative to the joint services offered by incumbents and direct broadcast satellite operators is threatened by restrictions upon its access to import key products, as well as a law that intends to nullify the merger with Multicanal. Stable Operating Track Record: Cablevision has leveraged its scale by offering various digital services coupled with strategic bandwidth initiatives that helped it improve average revenue per user (ARPU), maintain operating margins and subscriber loyalty, while lowering subscriber churn levels. For the three-month period ended March 31, 2012 and for the year ended Dec. 31, 2011, the company’s revenues and EBITDA remain relatively consist with those of the prior periods. What Could Trigger a Rating Action Key Rating Drivers: Catalysts for a downgrade center on adverse regulatory or legal issues, including the final application of the Broadcasting law approved in October 2009 and several legal actions working their way through the judicial process, such as the ones that threaten to nullify Cablevision’s merger with Multicanal S.A. Fitch will continue monitoring the evolution of these actions and judicial processes. A negative ruling could trigger a downgrade. 45 Corporates Recovery Rating The recovery ratings for Cablevision’s capital market debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery, constrained by the soft cap of ‘RR4’ for bonds issued by Argentine corporates. Although EBITDA is vulnerable to the continued legal actions against Cablevision, it should be noted that the company has financial flexibility as interests, and minimum capital expenditures are marginal compared to its distressed cash flow generation, considering the negative impact of any of the existing legal actions. Fitch has applied a 5.0x distressed EBITDA multiple, which is below the multiple used in the industry. Recovery Analysis Cablevision S.A. (USD Mil.) Going Concern Enterprise Value March 31, 2012 annualized EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 538 35 350 5.0 1,749 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Liquidation Value Cash A/R Inventory Net PPE Total Advance Rate 0 80 50 20 156.0 76.0 5.7 761.0 998.7 Available to Creditors 60.8 2.9 152.2 215.9 61 — 80 141 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 1,749 175 1,574 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 1,574 1,574 78 1,495 Distribution of Value Secured Priority Senior Secured Secured Unsecured Priority Senior Unsecured Lien 0.0 0.0 Lien 648 Value Recovered Recovery (%) 0 0 Value Concession Recovered Recovery (%) Allocation (%) 648 100 100 Recovery Rating Recovery Ratinga RR4 Notching Notching Rating Rating B a Cablevision’s recovery rating is capped at ‘RR4’ due to concerns about the low probability of high recoveries for bondholders of corporates domiciled in Argentina. The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Source: Fitch Ratings. Latin America High Yield November 8, 2012 46 Corporates Organizational Structure — Cablevision S.A. (USD Mil.) LTM March 31, 2012 Summary Statistics EBITDA Cash and Marketable Securities Total Debt 538 156 648 Argentina 100% Paraguay 70% PEM S.A. 70% CV Verasategui S.A. 100% Cable Imagen SRL 100% Wolves Television S.A. 60% Aire Vision Internacional S.A. 100% Prima S.A. 100% Cablevision S.A. IDR — B/Rating Outlook Negative 70% Television Dirigida SAECA Uruguay 100% Adesol S.A. Cablevision Comunicaciones SAECA 70% Consorcio Multipunto S.A. 100% Teledeportes Paraguay S.A. Fintelco S.A. Source: Fitch and Cablevision S.A. Latin America High Yield November 8, 2012 47 Corporates Debt and Covenant Synopsis Cablevision S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Multicanal S.A.a N.A. Indenture as of July 19, 2006; Second Amendment on July 20, 2006; Third Amendment on Sept. 20, 2006; Fourth Amendment on Dec. 18, 2006; Fifth Amendment on March 30, 2007; Sixth Amendment on Dec. 21, 2007; Eighth Amendment on June 30, 2009. July 20, 2016 USD80.3 million Step-Up Sr. Unsecured Notes due 2016 (10-Year Notes) N.A. N.A. Neither the issuer nor subsidiaries cannot sell assets that will result in a material adverse effect and if such sale is higher than USD10 million, unless an independent financial advisor has delivered a valuation to the board of directors and at a price consistent with such valuation. Neither the issuer nor subsidiaries are allowed to incur additional debt except permitted debt if total consolidated debt to annualized pro forma consolidated operating cash flow is lower or equal to 6.5x. Permitted debt includes debt used to refinance existing or permitted indebtedness if it is made pari passu or subordinated to the notes, subject to standard limitations. Debt can also be incurred if its related to performance bonds, obligations under the interest rate agreements and currency agreements and any other debt for USD25 million or less. Liens may not be incurred by issuer or any significant subsidiary, unless 1) such subsidiary simultaneously executes and delivers a supplemental indenture to the notes’ indenture providing for a guarantee by such subsidiary of payment of the notes and 2) such subsidiary waives and will not claim or take any right against the issuer or any other subsidiary as a result of any payment by such subsidiary under its subsidiary guarantee. No material provision noted. Cross default when an uncured event of default occurs for debt of more than USD10 million. If any event of default occurs and is continuing the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. Holders of the majority of the outstanding notes may rescind a declaration of acceleration within 30 days. Capital Expenditures N.A. Reserve Account N.A. Cash Sweep N.A. Transactions between issuer and shareholders, affiliates, or subsidiaries other than payments related with programming Transactions with Affiliates agreements for more than USD10 million shall require a fairness opinion. Restrictions on merger or consolidation of issuer and subsidiaries. Exceptions include 1) merger with a fully owned Limits on Consolidations or Mergers subsidiary which has positive net worth and the transaction does not imply any other delivery to shareholders other than ordinary shares representative of the transaction; 2) any surviving entity would assume all obligations of the issuer under the indenture; 3) immediately after giving effect to the emerge no event of default occurs. a Multicanal S.A. merged with Cablevisión S.A. back in 2006, and the merger was authorized in December 2007. Still, the merger needs to be registered by the Inspección General de Justicia. N.A. Not applicable. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 48 Corporates Financial Summary Cablevision S.A. (ARS 000, Fiscal Year Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 3 Months 3/31/12 2011 2010 2009 2008 2007 2006 586,323 32.7 — — — 1,989,315 31.4 28.3 (7.1) 18.4 1,777,571 36.4 31.2 11.3 21.7 1,469,412 34.8 32.0 17.1 18.6 1,157,905 33.9 26.2 6.5 9.3 862,865 33.0 21.1 6.5 7.4 477,892 34.8 11.8 20.6 6.0 7.0 8.8 3.8 7.0 1.2 2.3 1.6 7.0 8.6 3.7 7.0 (0.4) 0.6 1.0 11.0 11.7 6.3 11.0 2.5 3.9 1.8 7.1 6.8 3.6 7.1 2.3 2.6 2.3 5.0 4.6 2.2 5.0 0.9 1.2 1.3 3.9 3.5 2.0 3.9 1.0 1.3 1.3 4.6 4.1 1.7 4.6 1.4 2.1 2.4 1.5 1.2 0.9 10.8 0.1 1.3 1.1 0.8 11.2 0.1 1.2 1.1 0.9 7.5 0.1 1.3 1.4 1.3 9.4 0.1 2.0 2.2 2.0 10 0.1 2.6 2.9 2.7 9.6 0.1 4.9 5.5 5.0 6.1 0.1 8,153,193 683,261 354,641 2,486,894 2,841,535 2,841,535 0 2,841,535 3,827,582 6,669,117 7,804,212 539,943 306,314 1,799,527 2,105,841 2,105,841 0 2,105,841 3,628,548 5,734,389 6,462,002 395,309 128,892 1,898,200 2,027,092 2,027,092 0 2,027,092 3,314,107 5,341,199 5,697,998 143,788 196,174 1,852,661 2,048,835 2,048,835 0 2,048,835 2,770,863 4,819,698 5,525,921 185,434 278,399 2,275,885 2,554,284 2,554,284 0 2,554,284 2,253,883 4,808,167 5,062,025 158,581 182,343 2,318,716 2,501,059 2,501,059 0 2,501,059 2,040,541 4,541,600 4,942,128 212,092 170,226 2,435,108 2,605,334 2,605,334 0 2,605,334 1,864,364 4,469,698 400,642 1,392,524 (59,135) (47,693) 341,507 1,344,831 0 0 (219,452) (1,390,608) 0 (404,434) 122,055 (450,211) (5,778) (43,623) 1,344 6,877 24,895 642,983 0 0 (1,665) (11,391) 140,851 144,635 1,515,179 38,529 1,553,708 0 (866,808) (134,031) 552,869 (17,498) 9,469 13,781 0 (311,014) 247,607 1,326,859 (31,808) 1,295,051 0 (572,411) 0 722,640 (400) 18,499 (585,565) (74) (187,468) (32,368) 1,009,335 (41,714) 967,621 0 (747,104) 0 220,517 (13,185) 7,142 (129,280) 0 (57,418) 27,776 710,777 (29,001) 681,776 0 (511,040) 0 170,736 (15,540) 5,056 (198,906) 0 (19,681) (58,335) 413,204 64,828 478,032 0 (196,001) 0 282,031 (231,266) 0 (163,598) 0 260 (112,573) 1,792,323 — 419,656 66,817 218,133 4,885,061 15.8 1,315,189 151,917 660,153 4,218,974 23.5 1,035,990 215,827 468,022 3,417,476 30.8 809,196 251,661 200,691 2,612,972 90.4 555,321 246,113 143,997 1,372,115 55.3 305,020 116,284 107,447 6,336,886 29.7 1,377,183 230,780 639,907 Note: Numbers may not add due to rounding. Source: Cablevision S.A. and Fitch. Latin America High Yield November 8, 2012 49 Corporates Financial Summary Cablevision S.A. Period-End Exchange Rate Average Exchange Rate (USD 000, Fiscal Year Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 4.379 4.358 3 Months 3/31/12 4.305 4.160 3.979 3.913 3.799 3.728 3.454 3.163 3.150 3.117 3.061 3.075 2011 2010 2009 2008 2007 2006 134,527 32.7 — — — 478,258 31.4 28.3 (7.1) 18.4 454,227 36.4 31.2 11.3 21.6 394,166 34.8 32.0 17.1 18.2 366,067 33.9 26.2 6.5 9.8 276,870 33.0 21.1 6.5 7.4 155,437 34.8 11.8 20.6 5.9 7.0 8.8 3.8 7.0 1.2 2.3 1.6 7.0 8.6 3.8 7.0 (0.4) 0.6 1.0 11.0 11.7 6.4 11.0 2.5 3.9 1.8 7.1 6.8 3.6 7.1 2.3 2.6 2.3 5.0 4.6 2.3 5.0 0.9 1.3 1.3 3.9 3.5 2.0 3.9 1.0 1.3 1.3 4.6 4.1 1.7 4.6 1.4 2.1 2.4 1.5 1.2 0.9 10.8 0.1 1.3 1.0 0.8 11.1 0.1 1.2 1.1 0.9 7.4 0.1 1.3 1.4 1.3 9.1 0.1 1.9 2.0 1.9 10.4 0.1 2.6 2.9 2.7 9.6 0.1 4.9 5.5 5.0 6.1 0.1 1,862,055 156,046 80,994 567,966 648,960 648,960 0 648,960 874,157 1,523,116 1,812,699 125,414 71,148 417,979 489,128 489,128 0 489,128 842,810 1,331,937 1,624,149 99,356 32,396 477,091 509,487 509,487 0 509,487 832,962 1,342,449 1,499,868 37,849 51,638 487,671 539,309 539,309 0 539,309 729,366 1,268,675 1,599,954 53,690 80,607 658,951 739,558 739,558 0 739,558 652,581 1,392,139 1,606,992 50,343 57,887 736,100 793,987 793,987 0 793,987 647,791 1,441,778 1,614,547 69,288 55,611 795,527 851,138 851,138 0 851,138 609,070 1,460,208 91,924 (13,568) 78,356 0 (50,352) 0 28,005 (1,326) 308 5,712 0 (382) 32,317 334,782 (11,466) 323,316 0 (334,321) (97,231) (108,237) (10,488) 1,653 154,582 0 (2,739) 34,772 387,177 9,845 397,022 0 (221,497) (34,249) 141,276 (4,471) 2,420 3,521 0 (79,474) 63,272 355,927 (8,532) 347,395 0 (153,548) 0 193,846 (107) 4,962 (157,076) (20) (50,288) (8,683) 319,097 (13,188) 305,909 0 (236,194) 0 69,715 (4,168) 2,258 (40,871) 0 (18,152) 8,781 228,069 (9,306) 218,763 0 (163,979) 0 54,785 (4,986) 1,622 (63,824) 0 (6,315) (18,718) 134,397 21,086 155,483 0 (63,751) 0 91,732 (75,221) 0 (53,211) 0 85 (36,615) 411,234 — 96,287 15,331 50,049 1,523,473 22.0 331,093 55,483 153,842 1,248,291 10.3 336,073 38,820 168,690 1,131,729 4.7 277,902 57,895 125,546 1,080,420 28.9 255,824 79,562 63,448 838,432 87.9 178,187 78,971 46,205 446,289 47.6 99,210 37,822 34,948 Note: Numbers may not add due to rounding. Source: Cablevision S.A. and Fitch. Latin America High Yield November 8, 2012 50 Corporates CAP Limited Clarendon Alumina Production Limited Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B– B–/RR4 Local Currency Long-Term IDR B– IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data CAP Limited Total Adjusted Capital (USD Mil.) Total Debt (USD Mil.) Operating Revenue (USD Mil.) Net Income (USD Mil.) FCF Margin (%) ROAE (%) Total Debt to EBITDA (x) 3/31/11 3/31/10 242 264 424 373 127 126 (73) (17) 50 44 37 (33) (11.0) (25.8) Government Support Vital: CAP Limited’s (CAP) ratings are linked to those of Jamaica’s and reflect its 100% ownership by the government of Jamaica (GoJ), without support from which it could not continue operating. CAP is the holding company for the Jamaican government’s 45% ownership in an unincorporated joint venture with a subsidiary of Alcoa Inc. (Alcoa) called Jamalco, which is a bauxite mining and alumina refining operation in Jamaica. This joint venture involves the proportionate sharing of production costs and the alumina output of the Clarendon Alumina Refinery (CAR). CAR’s current production rate is about 1.36 million tons per year. Grants Required to Fulfill Financial Obligations: CAP is obliged to fund its share of running and operating expenses at CAR, and it would be unable to meet these obligations without support from the GoJ. CAP received grants from the GoJ of USD17 million in fiscal 2011 and USD107.4 million in fiscal 2010. These grants ensure that CAP is able to meet its supply agreement obligations with customers. The long-term foreign currency IDR of Jamaica is rated ‘B’ by Fitch Ratings with a Stable Outlook. CAP’s Stable Outlook mirrors the sovereign rating outlook on Jamaica, to which its ratings are tied. Weak Stand-Alone Financial Profile: On a stand-alone basis, CAP has an extremely weak financial profile for its rating category. Total debt has increased to USD424 million in fiscal 2011 from USD373 million in fiscal 2010, while EBITDA has deteriorated further to negative USD39 million from negative USD14 million over the same period. The decline in EBITDA is primarily a result of the unfavorable long-term contract the company has with Glencore. Fiscal 2011 revenues of USD127 million were based on total alumina sales of 602,202 metric tons. This was flat to revenues of USD126 million in fiscal 2010. Unsecured Notes Guaranteed by Sovereign: CAP’s USD200 million, 8.5% unsecured notes due November 2021 continue to be supported by an explicit unconditional and irrevocable guarantee by the GoJ for timely interest and principal on the notes. The GoJ guaranteed approximately 90% of CAP’s USD424 million of total debt as of the fiscal year-end March 31, 2011. Cash at USD4.1 million is extremely low in relation to short-term debt of USD169 million. What Could Trigger a Rating Action Analysts Jay Djemal +1 312 368-3134 jay.djemal@fitchratings.com Joe Bormann, CFA +1 312 368-3349 joe.bormann@fitchratings.com Latin America High Yield November 8, 2012 Ratings Tied to Sovereign: CAP’s future rating actions are directly linked to Fitch’s actions taken on Jamaica. If Fitch were to further downgrade the ratings on the sovereign due to concerns regarding macroeconomic pressures or upgrade the ratings due to liquidity improvement, then CAP’s ratings would also mirror this action. This rating linkage will continue as long as the company remains 100% owned by the GoJ. The GoJ announced in 2009 that it is seeking to sell its 45% stake in Jamalco, and Fitch understands that this process is ongoing. Fitch notes that Alcoa has a right of first refusal on buying the shares. CAP’s USD200 million 8.5% unsecured notes due 2021 are subject to a change-of-control clause, which creditors may choose to activate. Should any potential change of control result in effective acceleration of the obligation, Fitch will review for possible rating action. 51 Corporates Liquidity and Debt Structure Without the GoJ’s support, CAP has an extremely weak financial profile for its rating category, and its capital structure would not be sustainable on a stand-alone basis. Total debt increased to USD424 million in fiscal 2011 from USD373 million in fiscal 2010. CAP received USD124 million in total grants from the GoJ over the last two years, with USD17 million received in fiscal 2011 and USD107 million received in fiscal 2010. These grants ensured that CAP was able to perform to the level required to meet its supply agreement obligations with customers. Most of CAP’s long-term debt is comprised of the USD200 million notes issued in November 2006. CAP, via its affiliate, Jamaica Bauxite Mining Limited (JBM), also has a USD33 million obligation (USD65 million original amount) to Glencore, CAP’s main customer. The proceeds of this loan were used to fund CAP’s share of an expansion project with Alcoa. As of March 31, 2011, approximately 90% of CAP’s total debt of USD424 million was guaranteed by the GoJ. Recent Financial Performance As a result of unfavorable long-term contracts, CAP generated negative EBITDA of USD39 million during fiscal 2011 and has exhibited negative EBITDA since 2007. Fiscal 2011 revenues of USD127 million were based on total alumina sales of 602,202 metric tons with an average price per ton of USD209. This compares as a flat performance to fiscal 2010 revenues of USD126 million. CAR’s current production rate is about 1.36 million tons of alumina per year. The company’s cash on balance sheet of USD4.1 million is insufficient to meet short-term debt requirements of USD169 million, indicating that ongoing government assistance will be required. CAP’s 2011 capital expenditures were USD11 million, mostly used for Jamalco’s mining infrastructure. FFO generated for fiscal 2011 was negative USD24 million. This compares with FFO of USD18 million in fiscal 2010. The negative performance is primarily due to the longterm inflexible supply contracts with CAP’s main customer, Glencore, which have constrained CAP’s ability to pass on higher caustic soda and fuel input costs. The long-term contracts with Glencore are a legacy of the AEL Secured Export Notes (10.48%) due in 2010, which were repaid early in February 2007 and were secured by future alumina receivables. The contract with Glencore expires in 2016. Recovery Analysis The USD200 million, 8.5% unsecured notes due 2021 have a recovery rating of ‘RR4’. CAP’s unsecured notes are 100% guaranteed by the GoJ. Therefore, Fitch expects the notes will have the same recovery risk as the sovereign. Latin America High Yield November 8, 2012 52 Corporates Organizational Chart — CAP Limited Alcoa (United States) Alumina Limited (Australia) 60% Government of Jamaica 40% 100% Alcoa World Alumina and Alcoa Caribbean Alumina Holdings 100% 100% Alcoa Minerals (Jamaica) CAP JBM and BATCO 45% 55% Jamalco/CAR Source: CAP. Latin America High Yield November 8, 2012 53 Corporates Debt and Covenant Synopsis — Clarendon Alumina Production Limited (CAP) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Acquisitions/Divestitures Change of Control Provision Debt Restriction Limitation on Liens Clarendon Alumina Production Limited The Government of Jamaica Nov. 9, 2006 Nov. 16, 2021 Senior Unsecured Notes USD200 Million Occurs when CAP’s interest in the Jamalco joint venture falls below 50% if at such time the amount of alumina production of the Jamalco joint venture that CAP is entitled to receive in a calendar year is less than 625,000 metric tons. CAP will not, and will not permit any subsidiary to, directly or indirectly, issue, assume, or guarantee to exist any lien of any nature whatsoever on any of its properties or assets without effectively providing that the notes are secured equally and ratably with the obligations so secured for so long as such obligations are so secured. Security interests may be permitted if they: (1) are existing or permitted under any existing facility; (2) secure the costs of the acquisition, construction, development, or expansion of any property or asset; (3) exist on any property or asset at the time of its acquisition or arising after such acquisition; (4) are granted by CAP to any person with whom CAP enters into a hedging arrangement; or (5) secure indebtedness not expressly permitted above, provided that the aggregate outstanding principal amount of such secured indebtedness does not exceed USD10 millon or its equivalent. Source: CAP Ltd. offering memo and Fitch Ratings. Latin America High Yield November 8, 2012 54 Corporates Financial Summary Clarendon Alumina Production Limited (CAP) (USD 000, Years Ended March 31, 2011) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2011 2010 2009 2008 2007 (38,621) (38,621) (30.49) (30.49) 2.24 (16.97) 50.13 (14,464) (14,464) (11.5) (11.5) 18.4 36.6 (33.3) (15,560) (15,560) (11.8) (11.8) (10.6) (125.9) 54.2 (5,862) (5,862) (5.0) (5.0) 25.9 (54.5) 89.4 (11,230) (11,230) (8.5) (8.5) 6.4 (40.3) 3,238.9 0.19 (1.32) (1.32) (0.19) (0.19) 0.19 0.04 0.06 (0.95) 1.6 (0.5) (0.5) (0.1) (0.1) 1.6 0.6 0.6 14.6 (1.1) (0.5) (0.5) (0.1) (0.1) (1.1) (0.9) (0.9) (3.2) 2.3 (0.2) (0.2) (0.1) (0.1) 2.3 (0.7) (0.4) 0.5 0.6 (0.4) (0.4) (0.1) (0.1) 0.6 (0.3) 0.3 0.2 78.21 (10.97) (10.86) (10.97) (10.86) 7.33 — 0.40 7.7 (25.8) (25.7) (25.8) (25.7) 7.3 — 0.2 (14.1) (29.5) (29.5) (29.5) (29.5) 7.5 — 0.3 5.3 (55.7) (52.9) (55.7) (52.9) 8.6 — 0.1 17.0 (25.5) (21.3) (25.5) (21.3) 12.2 — 0.2 347,261 4,100 169,358 254,219 423,577 — 423,577 0 423,577 (181,998) 241,579 350,496 783 88,872 284,263 373,135 — 373,135 0 373,135 (109,045) 264,090 375,758 929 128,065 331,445 459,510 — 459,510 0 459,510 (152,622) 306,888 362,452 16,057 30,441 295,838 326,279 — 326,279 0 326,279 (87,559) 238,720 332,262 46,773 50,287 235,736 286,023 — 286,023 0 286,023 (24,038) 261,985 (23,791) 13,308 (10,483) 0 (11,009) 0 (21,492) 4 17,004 7,798 0 0 3,314 18,213 31,176 49,389 0 (3,388) 0 46,001 0 107,386 (117,319) 0 0 36,068 (61,965) (64,492) (126,457) 0 (39,446) 0 (165,903) 7 59,764 91,004 0 0 (15,128) 35,454 27,311 62,765 0 (126,689) 0 (63,924) 19,145 691 13,372 0 0 (30,716) (10,617) 24,003 13,386 0 (66,604) 0 (53,218) 919 0 113,526 0 0 61,227 126,662 0.78 (61,629) 29,207 0 (72,953) 125,677 (4.6) (34,614) 30,444 0 43,577 131,775 12.4 (35,479) 29,295 0 (65,063) 117,221 (11.3) (23,558) 26,388 0 (49,898) 132,093 5.8 (21,461) 27,476 0 (45,280) Source: Fitch. Latin America High Yield November 8, 2012 55 Corporates Capex S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Capex S.A. (USD Mil.) Revenue EBITDA Cash Flow from Operations (CFFO) Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) Total Debt/ CFFO (x) 4/30/12 176.2 32.4 4/30/11 177.2 46.4 43.1 46.7 4.9 237.7 45.3 230.8 7.3 5.0 7.2 4.0 3.2 3.0 Argentine and Regulatory Risks Are High: The ‘B’ ratings of Capex S.A. are constrained by the ‘B’ country ceiling of Argentina. The ratings are also restricted by the high regulatory risks associated with operating in the electricity sector in Argentina, which has resulted in electricity and gas prices that are below market levels. This has discouraged investments in both sectors. Capital investments for maintenance in the power generation industry depend on discretional approvals by the regulatory authority. Volatile Cash Flow and Currency Mismatch: Capex’s cash flow generation is volatile, and power generation is subject to regulatory issues and weather conditions. The company’s operating cash flow generation is concentrated in Argentina. Capex is also exposed to devaluation risk due to the currency mismatch between its peso-denominated cash flows and its U.S. dollar-denominated debt. Vertical Integration: Capex is an integrated thermoelectric generating company. Originally formed as an oil exploration and production company, Capex was transformed into an electric generation company due to its large discoveries of natural gas in 1991, coupled with the liberalization of Argentina’s electricity sector. As of April 30, 2012, 65.1% of Capex’s sales were derived from electric sales and 34.8% from oil and other liquids sales. In the last year, the gross energy generation was 3,270 GWh, a decline of 14.9% compared to the year before due to a one-time external event that affected the combined cycle generation for four months. Investments Key to High Degree of Vertical Integration: For the fiscal year ended April 30, 2012, Capex had CFFO of USD43 million and capital expenditures of USD45 million. The company has some flexibility to manage capital expenditures in the short term. In the long run, however, investments are vital to continue a high degree of vertical integration. Proven gas reserves cover approximately six to eight years of the electric plant’s needs. Operating Efficiencies: Capex has operating flexibility because it owns natural gas reserves. As a result, approximately 80% of gas needs at the electric plant are self-supplied. This gives the company an advantage over other players. Capex’s generating units are efficient, and the proximity to its natural gas reserves in the Agua del Cajon field reduces the gas supply risk. What Could Trigger a Rating Action Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Latin America High Yield November 8, 2012 Changes Affecting Capex’s Financial Structure: The Stable Outlook reflects Fitch’s expectation that Capex will manage its balance sheet to a targeted CFFO adjusted leverage ratio of around 3.0x. Under a conservative scenario, Fitch estimates the company’s interest coverage to be above 2.5x. A significant increase in Capex’s targeted leverage ratio would threaten credit quality and could result in a negative rating action. Sustained Decline in Gas Reserves: The ratings of Capex could be negatively affected by a sustained decline in gas reserves and production or failure to further develop new fields, which could threaten the integrated business model in the long term. Significant Changes in the Regulatory Framework: The ratings could be positively affected by a significant and sustained improvement in the regulatory environment. Conversely, a poor framework or a lower sovereign rating could result in a negative rating action. 56 Corporates Recovery Rating The recovery ratings for Capex’s capital market debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery in the event of a default. The ratings have been constrained by the soft cap of ‘RR4’ for bonds issued by corporates domiciled in Argentina. A liquidation analysis was not performed due to the low probability that the company would be liquidated, as a default would most likely occur to the imposition of exchange controls by the government, or an unfavorable tariff regime. Recovery Analysis Capex S.A. (USD Mil.) Going Concern Enterprise Value April 30, 2012 EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 32.4 25 24.3 6.0 145.8 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 28.8 — 20.0 48.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 145.8 14.58 131.2 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 131.2 — 131.2 6.6 124.7 Distribution of Value Secured Priority Senior Secured Unsecured Priority Senior Unsecured Lien 0 Lien 237.7 Value Recovered Value Recovered 131.2 Recovery (%) 0 Recovery (%) 55 Concession Allocation (%) 100 Recovery Rating Recovery Rating RR4a Notching Rating Notching Rating B a Capex’s recovery rating is capped at the level of ‘RR4’ due to concerns about the low probability of high recoveries for bondholders of corporates domiciled in Argentina. The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Concession payments allocated to subordinated debt should never result in higher recoveries than those of senior unsecured debt. Source: Fitch Ratings. Latin America High Yield November 8, 2012 57 Corporates Organizational Structure — Capex S.A. Capex S.A. FYE April 2012 – Summary Statistics USD32.4 Million of EBITDA USD4.9 Million of Cash and Marketable Securities USD237.7 Million of Total Debt USD200 Million Senior Unsecured Notes Due 2018 95.00% Hychico 15.12% 84.87% Buproneu Source: Fitch and Capex S.A. Latin America High Yield November 8, 2012 58 Corporates Debt and Covenant Synopsis Capex S.A. Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Capex S.A. N.A. Feb. 23, 2011 2018 Senior Unsecured Notes N.A. N.A. Change of control clause at 101% of principal. The company will not and will not permit any restricted subsidiary to make any asset disposition unless: 1) the consideration received at the time of the sale is equal to the fair value of the shares or assets sold; 2) at least 75% of that consideration is received in the form of cash or equivalents, replacement assets or a combination of the above. The company will not, and will not cause or permit any of its restricted subsidiaries to, directly or indirectly, incur any indebtedness (including acquired indebtedness, with the exception of permitted) except that the company may incur indebtedness if, at the time of and immediately after giving pro forma effect to the incurrence and the application of the net proceeds therefrom, 1) no default or event of default shall have occurred and be continuing and 2) the consolidated interest coverage ratio would be no less than 2.5x and the consolidated indebtedness-to-consolidated EBITDA ratio would be no greater than 3.5x. The company will not and will not permit any of its restricted subsidiaries to: 1) declare or pay any dividend other than: a) dividends paid in capital stock, b) dividends paid to the company or restricted subsidiary; c) dividends, distributions or returns of capital made on a pro rata basis to the company and its restricted subsidiaries; 2) purchase, redeem, or otherwise acquire or retire for value any capital stock of the company held by persons other than the company or any of its restricted subsidiaries; 3) make any principal payment on, purchase, defease, redeem, prepay, decrease, or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment, or scheduled sinking fund payment, as the case may be, any subordinated debt (other than subordinated debt between the company and any restricted subsidiary); or 4) make any investments other than permitted investments. Other Limitation on Liens Transactions with Affiliates Sales and Leaseback Transactions Mergers, Consolidations, Sales, Leases The company will not and will not permit any of the restricted subsidiaries to assume any lien (except for permitted ones) upon its property, unless at the same time the obligations under the notes are secured equally. The company will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions with, or for the benefit of, any of its affiliates, unless 1) the terms of such affiliate transaction are no less favorable than those that could reasonably be obtained in a comparable transaction at such time on an arm’s-length basis from a person that is not an affiliate of the company, 2) in compliance with applicable law, and 3) approved by the audit committee of the company. The company or its restricted subsidiaries will not enter into any sale and lease back transactions unless pursuant to the provisions of the covenant described under “Limitation on Indebtedness.” Not allowed unless: 1) the company is the surviving or continuing corporation; or 2) the person (if other than the company) formed by such consolidation is a corporation organized and validly existing under the laws of Argentina or any other qualified merger jurisdiction; and expressly assumes, by supplemental indenture (in form and substance satisfactory to the trustee), executed and delivered to the trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the notes and the performance and observance of the covenants of the notes and the indenture on the part of the company to be performed or observed. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 59 Corporates Financial Summary Capex S.A. Period-End Exchange Rate Average Exchange Rate (USD 000, Fiscal Years Ended April 30 ) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 4.3786 4.2098 4.0507 3.9559 3.8857 3.8759 3.7140 3.2594 3.1440 3.1440 3.0895 3.0830 2012 2011 2010 2009 2008 2007 32,403 18.4 23.6 (1.1) 6.1 46,476 26.2 23.6 (0.1) (3.4) 34,106 26.8 18.6 13.4 (9.6) 60,277 33.2 25.1 12.5 (16.2) 75,309 41.4 32.6 13.4 1.6 46,934 37.3 21.3 30.6 0.9 2.6 1.1 0.6 2.6 0.5 0.6 1.0 2.6 1.6 0.9 2.6 0.6 1.5 1.0 2.2 1.4 0.8 2.2 0.9 1.5 1.9 5.9 3.4 2.4 5.9 1.6 2.5 1.4 4.0 2.2 1.8 4.0 1.4 3.0 1.6 4.8 2.7 1.4 4.8 1.7 3.3 2.5 3.2 7.3 7.2 12.3 0.1 3.0 5.0 4.0 13.8 0.1 3.6 5.8 5.1 10.9 0.1 2.4 4.3 3.9 6.9 0.0 1.9 3.4 2.6 13.4 0.0 2.9 5.2 4.1 14.5 0.1 361,599 4,930 25,125 212,572 237,696 237,696 0 237,696 66,904 304,601 371,372 45,354 20,432 210,398 230,830 230,830 0 230,830 89,675 320,505 337,773 25,440 20,271 177,432 197,703 197,703 0 197,703 96,665 294,368 436,882 23,887 7,518 251,916 259,434 259,434 0 259,434 111,504 370,938 492,712 64,869 7,687 251,829 259,516 259,516 0 259,516 154,530 414,046 451,648 53,408 15,085 228,446 243,531 243,531 0 243,531 154,675 398,206 46,022 (2,847) 43,175 0 (45,124) 0 (1,949) 0 (43,621) 7,058 0 (38,512) 47,984 (1,228) 46,756 0 (46,949) 0 (193) 87 (5,799) 27,993 0 22,088 29,936 6,119 36,055 0 (19,063) 0 16,992 173 41,976 (53,017) 0 6,124 88,010 (9,721) 78,289 0 (55,256) (357) 22,676 163 (67,265) 3,899 0 (40,527) 101,445 (38,236) 63,209 0 (40,696) 1,798 24,311 0 (18,964) 8,056 0 13,403 67,173 (3,334) 63,839 0 (25,411) 0 38,427 82 2 (19,566) 20,546 39,491 176,190 (0.6) 9,432 28,872 4,756 177,241 39.5 10,141 29,557 (3,147) 127,054 (30.0) (4,412) 24,837 (10,044) 181,534 (0.1) 6,879 17,969 (21,587) 181,697 44.5 30,500 33,649 2,449 125,711 8,555 17,630 663 Source: Fitch and Capex S.A. Latin America High Yield November 8, 2012 60 Corporates Financial Summary Capex S.A. (ARS 000, Fiscal Years Ended April 30) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 2012 2011 2010 2009 2008 2007 136,410 18.4 23.6 (1.1) 6.1 183,855 26.2 23.6 (0.1) (3.4) 132,192 26.8 18.6 13.4 (9.9) 196,466 33.2 25.1 12.5 (15.6) 236,771 41.4 32.6 13.4 1.6 144,696 37.3 21.3 30.6 0.9 2.6 1.1 0.6 2.6 0.5 0.6 1.0 2.6 1.6 0.9 2.6 0.6 1.5 1.0 2.2 1.4 0.8 2.2 0.9 1.5 1.9 5.9 3.4 2.3 5.9 1.5 2.6 1.4 4.0 2.2 1.8 4.0 1.4 3.0 1.6 4.8 2.7 1.4 4.8 1.7 3.3 2.5 3.3 7.6 7.5 7.6 7.5 12.3 0.1 3.0 5.1 4.1 5.1 4.1 13.7 0.1 3.6 5.8 5.1 5.8 5.1 11.1 0.1 2.8 4.9 4.5 4.9 4.5 6.6 0.0 1.9 3.4 2.6 3.4 2.6 13.5 0.0 2.9 5.2 4.1 5.2 4.1 14.4 0.1 1,583,298 21,587 110,011 930,766 1,040,777 1,040,777 0 1,040,777 292,947 1,333,724 1,504,315 183,714 82,762 852,258 935,020 935,020 0 935,020 363,247 1,298,267 1,312,483 98,852 78,767 689,446 768,213 768,213 0 768,213 375,610 1,143,823 1,622,578 88,716 27,922 935,616 963,538 963,538 0 963,538 414,124 1,377,662 1,549,087 203,947 24,168 791,750 815,918 815,918 0 815,918 485,843 1,301,761 1,395,366 165,003 46,604 705,783 752,387 752,387 0 752,387 477,867 1,230,254 193,742 (11,984) 181,758 0 (189,964) 0 (8,206) 0 (183,635) 29,714 0 (162,127) 189,819 (4,856) 184,963 0 (185,726) 0 (763) 345 (22,940) 110,737 0 87,379 116,028 23,716 139,744 0 (73,886) 0 65,858 672 162,695 (205,490) 0 23,735 286,859 (31,686) 255,173 0 (180,100) (1,163) 73,910 531 (219,244) 12,709 0 (132,094) 318,942 (120,213) 198,729 0 (127,948) 5,654 76,435 0 (59,622) 25,327 0 42,140 207,093 (10,280) 196,813 0 (78,343) 0 118,470 254 6 (60,323) 63,344 121,751 741,726 5.8 39,705 121,544 20,020 701,147 42.4 40,115 116,925 (12,450) 492,448 (16.8) (17,099) 96,265 (38,931) 591,692 3.6 22,423 58,567 (70,361) 571,254 47.4 95,892 105,793 7,700 387,567 26,376 54,352 2,045 Source: Fitch and Capex S.A. Latin America High Yield November 8, 2012 61 Corporates Ceagro Agricola Ltda. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured Secured B B B Local Currency Long-Term IDR B National Long-Term Rating BBB Established Business Position: Ceagro Agricola Ltda. (Ceagro) has established long-term relationships with grain producers, suppliers, and offtakers. The company’s profile has benefited from an increase in its operating scale between 2010 and 2011, which has allowed it to purchase fertilizers at lower prices and increase the volume of barter originations. In 2012, for the third year in a row, the company’s EBITDA margins are expected be strong, in the high single digits, and above the historical levels of between 3% and 5% (albeit lower than the 12% in 2010). Rating Outlooks Foreign Currency Long-Term IDR Local Currency Long-Term IDR National Long-Term Rating Stable Stable Stable Financial Data Ceagro Agricola Ltda. (BRL Mil.) Revenue Operating EBITDAR Operating EBITDAR/ Revenues (%) Cash Flow from Operations Free Cash Flow FFO Interest Coverage (x) Total Debt Total Adjusted Debt/Operating EBITDAR (x) FFO Adjusted Leverage (x) LTM 6/30/12 12/31/11 1,050 99 969 94 9.3 10.0 1 (3) (91) (101) 5.5 295 5.3 290 3.0 3.1 1.6 1.7 High Commodity Risk and Small Size Limit Rating: Ceagro’s net leverage of 2.6x as of June 30, 2012 is well below that of most companies rated in the ‘B’ rating category. This ratio partially reflects a favorable commodity environment during the past year that has led to strong demand and high prices for grain. The ‘B’ ratings of Ceagro, despite leverage lower than most of its peers in the rating category, continue to reflect the high volatility of the agriculture industry. The company’s small size compared to its large and established competitors also limits the rating. Working Capital Requirements Impediment to Growth: Trades originated through Caegro’s barter system grew to 46% of revenue during 2011 from 40% in 2010, as a result of fully deploying the proceeds from the notes issued in October 2010. The amount of spot trades the company was able to originate within the limits of its working capital was not sufficient to maintain the same growth pace. Unlike trades through the barter system, spot market trades require working capital for shorter periods of time and have lower profit margins. Asset Light Model: Net of short-term assets, Ceagro has a minimal amount of balance sheet assets. It depends on rentals for transportation and storage. While this has not been a problem in the past, the cost of renting equipment may rise in the future and compress operating margins. The company’s debt has very little tangible support, which hurts recovery prospects. Fitch notes positively, however, that short-term assets are very liquid and of high quality. What Could Trigger a Rating Action Analysts Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Gisele Paolino +55 21 4503-2624 gisele.paolino@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: Deterioration in Ceagro’s liquidity, or an increase in the company’s leverage range of 3.0x–5.0x during the cycle could lead to a negative rating action. Leverage could increase either by weakening profitability, the launch of a large debt-financed investment program or sudden drop in trading volumes. Changes in its risk management, resulting in a higher exposure to commodity prices and exchange rate volatility, would also be viewed negatively. Conversely, a demonstrated ability to maintain margins in the 8%–10% level and an increase in trading volumes without disproportionately increasing leverage could result in a positive rating action. 62 Corporates Recovery Worksheet Ceagro’s recovery rating of ‘RR4’ indicates that the company’s creditors would have average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. This rating reflects a recovery rating cap for Brazil issuers of ‘RR4’, whereas Ceagro’s modified recovery analysis suggests a higher recovery level for the unsecured debt consistent with ‘RR1’. Fitch has performed a liquidation analysis in the event of bankruptcy. Considering the enterprise value is not appropriate, because Ceagro is a trading company. Its enterprise value can go down rapidly. Therefore, recovery analysis focuses on the liquidation value. Recovery Analysis Ceagro Agricola Ltda. (BRL Mil.) Going Concern Enterprise Value Liquidation Value June 30, 2011 LTM EBITDA — Cash Discount (%) 25 A/R Post-Restructuring EBITDA Estimation Multiple (x) — 339.5 80 271.6 70.8 — Inventory 94.4 75 Net PPE 42.2 25 Total Available to Creditors 0 4.0 — Going Concern Enterprise Value Advance Rate 48.0 10.5 524.1 352.9 Post-Restructuring EBITDA Estimation Guidelines Interest Expense — Rent Expense — Estimated Maintenance Capital Expenditures — Total — Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Concession Payment Availability Table 352.9 35.3 Adjusted Enterprise Value for Claims 317.6 Adjusted Enterprise Value for Claims 317.6 Less Secured Debt Recovery 204.8 Remaining Recovery for Unsecured Claims 112.8 Concession Allocation (5%) 5.6 Value to be Distributed to Senior Unsecured Claims Secured Priority Senior Secured Secured 107.2 Lien Value Recovered Recovery (%) Recovery Rating Notching Rating 204.8 204.8 100 RR1 +3 BB 0.0 — 0 — — — Unsecured Priority Lien Value Recovered Recovery (%) Concession Allocation (%) Recovery Rating Notching Rating Senior Unsecured 93.9 93.9 100 100 RR1 +3 BB The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Source: Fitch Ratings. Latin America High Yield November 8, 2012 63 Corporates Organizational Structure — Ceagro Agricola Ltda. (BRL 000, As of June 30, 2012) Antonio Carlos Gonçalves Jr. Christine Crothers Gonçalves 99.94% 0.06% Ceagro Participaçoes e Empreendimentos Ltda. 0.01% 0.01% 0.01% 99.99% Ceagro Agricola Ltda. Total Debt EBITDA Total Debt/EBITDA (x) Net Debt/EBITDA (x) 303,303 98,993 3.0 2.6 99.99% USD100 Mil. Senior Sec. Notes due 2016 99.99% Ceagro Armazéns Gerais Ltda. Ceagro Exportadora e Importadora Ltda. No Debt No Debt Source: Fitch and Ceagro Agricola Ltda. Latin America High Yield November 8, 2012 64 Corporates Debt and Covenant Synopsis — Ceagro Argricola Ltda. Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Limitation on Indebtedness Financial Covenant Ceagro Agrícola Ltda. Ceagro Participações e Empreendimentos Ltda. Oct. 20, 2010 May 16, 2016 Senior Secured Notes USD100 Million The issuer will not, and will not permit any restricted subsidiary to, incur any indebtedness, provided, however, that the issuer or any restricted subsidiary may incur indebtedness if on the date of such incurrence and after giving effect thereto and the application of the proceeds there from, the issuer’s net debt-to-EBITDA ratio would not be greater than 3.25x. Limitation on Additional Debt Neither the issuer nor the guarantor may incur indebtedness that is subordinate in right of payment to other indebtedness of the issuer or the guarantor unless such indebtedness is also subordinate in right of payment to the notes or the note guarantee on substantially identical terms, provided, however, that no indebtedness will be deemed to be subordinated in right of payment to any other indebtedness solely by virtue of being unsecured or by virtue of being secured on a senior or subordinated basis. Limitation on Lien The issuer will not, and will not permit any restricted subsidiary to, issue, assume, or guarantee any indebtedness secured by a lien upon any property or assets of the issuer or any restricted subsidiary without effectively providing that the notes together with, if the issuer so determines, any other indebtedness or obligations then existing or thereafter created or, in respect of liens on any property or assets of the issuer, the note guarantee, shall be secured equally and ratably with or prior to such indebtedness for so long as such indebtedness shall be so secured; provided, however, that any lien created for the benefit of the noteholders (and, if applicable, holders of such other indebtedness or obligations) pursuant to the foregoing shall provide by its terms that such lien will be automatically and unconditionally released and discharged upon release and discharge of the initial lien. Lien on the Collateral Except as provided for under the indenture and the other collateral documents, the issuer shall not, and shall not permit any of its subsidiaries to, create or permit to exist any lien on the collateral. The issuer will not, and will not permit any restricted subsidiary to make any asset disposition unless: 1) the asset disposition is for fair market value; 2) at least 75% of the consideration consists of all or part of any of cash and temporary cash investments or additional assets; 3) within 365 days after the receipt of any net available cash from an asset disposition, the net available cash is used to permanently repay indebtedness, other than subordinated obligations, of the issuer or of any of its restricted subsidiaries; to acquire all or substantially all of the assets of a related business, or a majority of the voting stock of another person that thereupon becomes a restricted subsidiary engaged in a related business, or to make capital expenditures or otherwise acquire long-term assets that are to be used in a related business or to acquire additional assets for the issuer or its restricted subsidiaries. Asset Disposition Restriction Sale and Lease-Back Transactions Restriction The issuer will not, and will not permit any restricted subsidiary to, enter into any sale or leaseback transaction. Transactions with Affiliates Restriction The issuer will not, and will not permit any restricted subsidiary to, enter into any transaction (or series of related transactions) with any affiliates, including any investment, either directly or indirectly, unless 1) such transaction or series of related transactions are on terms no less favorable to the issuer or such restricted subsidiary, as the case may be, than those that could have been obtained in a comparable arm’s-length transaction with an unrelated third party; and 2) the issuer delivers to the trustee with respect of any affiliate transaction or series of related affiliate transactions involving aggregate consideration in excess of USD2 million, an officer’s certificate stating that such affiliate transaction complies with this covenant and that such affiliate transaction has been approved by the management of the issuer; and with respect of any affiliate transaction or series of related affiliate transactions involving aggregate consideration in excess of USD10 million, an opinion as to the fairness to the issuer, or such restricted subsidiary of such affiliate transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of recognized standing. Dividends Restriction The issuer will not, and will not permit any restricted subsidiary to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any restricted subsidiary to pay dividends or make any other distributions on its capital stock to the issuer or any restricted subsidiary; pay any indebtedness owed to the issuer or any restricted subsidiary; make loans or advances to the issuer or any restricted subsidiary; or transfer any of its properties or assets to the issuer or any restricted subsidiary. Source: Fitch and Ceagro Agricola Ltda. Latin America High Yield November 8, 2012 65 Corporates Financial Summary — Ceagro Agricola Ltda. (BRL 000, Years Ended as of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 98,993 98,993 9.34 9.34 36.37 — 7.58 93,794 93,794 9.68 9.68 34.89 (10.00) 17.78 98,397 100,877 11.99 12.29 19.94 0.64 47.67 33,757 35,932 4.69 4.99 8.67 (3.00) 36.15 21,075 22,723 3.19 3.44 26.44 (1.00) 31.79 5.47 2.88 2.88 1.03 1.03 5.47 0.32 0.82 0.28 5.32 2.94 2.94 0.99 0.99 5.32 (1.00) 0.11 (9.00) 3.82 4.87 4.45 2.75 2.64 3.51 0.71 6.36 2.95 4.22 13.85 7.79 1.71 1.64 2.7 (1.00) (1.00) (30.00) 9.79 9.29 5.8 3.88 3.21 6.09 (1.00) (1.00) (7.00) 1.60 3.04 2.56 3.04 2.56 13.45 — 0.21 1.71 3.10 2.25 3.10 2.25 12.49 — 0.22 2.94 2.25 0.20 2.32 0.32 14.35 — 0.07 5.68 1.78 1.59 1.97 1.80 5.34 — 0.29 1.66 1.49 1.34 1.74 1.61 11.01 — 0.10 745,738 48,040 61,964 239,339 301,303 — 301,303 — 301,303 215,291 516,594 499,960 79,769 62,640 227,808 290,448 — 290,448 — 290,448 197,094 487,542 404,693 201,857 15,550 205,910 221,460 — 221,460 12,400 233,860 164,911 398,771 138,635 6,213 17,339 42,607 59,946 — 59,946 10,875 70,821 72,999 143,820 84,325 3,097 3,157 28,212 31,369 — 31,369 8,240 39,609 50,651 90,260 153,543 (152,233) 1,310 — (4,744) — (3,434) 234 30 (34,721) — — (37,891) 138,157 (229,642) (91,485) — (9,937) — (101,422) 234 — (20,900) — — (122,088) 56,856 (48,868) 7,988 — (2,704) — 5,284 — — 160,359 30,001 — 195,644 7,857 (30,105) (22,248) — (751) — (22,999) (27) — 26,142 — — 3,116 19,946 (27,997) (8,051) — (1,096) — (9,147) (14,511) — 19,491 — — (4,167) 1,059,799 9.33 98,282 34,344 — 15,713 969,080 18.07 93,277 31,957 — 32,183 820,801 14.03 98,090 20,192 2,480 56,711 719,820 8.83 33,668 2,437 2,175 22,349 661,412 73.53 20,739 2,269 1,648 Source: Company reports and Fitch estimates. Latin America High Yield November 8, 2012 66 Corporates Celulosa Argentina S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR B Local Currency Long-Term IDR B Volatile Cash Flow Generation: Celulosa Argentina S.A.’s (Celulosa) small size makes it more vulnerable to industry cycles due to lower economies of scale. Also, its operating results are exposed to high levels of volatility in international pulp prices. The company is also exposed to double-digit inflation in Argentina and other direct and indirect sovereign-related risks, including devaluation and refinancing risks. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Celulosa Argentina S.A. (USD Mil.) Revenue EBITDA Cash Flow from Operations Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) CFFO/Net Debt (x) 5/31/12 389.6 62.3 5/31/11 365.6 65.8 19.5 22.6 7.0 156.6 7.0 156.4 2.5 2.4 2.4 0.1 2.3 0.2 Business Model Vertically Integrated: Celulosa has pulp and paper mills in both Argentina and Uruguay, the latter through its subsidiary, Fanapel. Its operations are vertically integrated through distribution. The company purchases almost all of its fiber requirements from third parties. Dependent upon Import Restrictions: Celulosa is small in size compared to its peers in Chile and Brazil. This results in a cost structure that is above average within South America. The company benefits from import tariffs and other agreements, such as a bilateral trade agreement between the governments of Argentina and Brazil that limits Brazilian paper imports and reduces competition in the domestic market. Adequate Business Position: Celulosa is one of two market leaders in Argentina with a market share of 35% in the paper market. Celulosa has a diversified and stable customer base. Given its high cost structure, Celulosa has little flexibility to compete in the export market, which makes it highly dependent upon local demand. Aggressive Growth Strategy: Celulosa plans to increasingly integrate its operations into forestry and to develop new business lines. The acquisition of forestry assets has lead to demand from third parties for eucalyptus wood. As of today, 95% of the company’s wood purchases are done on a spot basis, exposing the company to price and volume risks. Current market conditions prevent Celulosa from rolling out its growth strategy. Liquidity Is Tight: As of May 31, 2012, Celulosa had USD7 million of cash and marketable securities and USD71 million of short-term debt. Historically, the company has had a high concentration of its financial debt in the short term and has consistently been able to refinance these trade lines of credit. What Could Trigger a Rating Action Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Joe Bormann, CFA +1 312 368-3349 joe.bormann@fitchratings.com Latin America High Yield November 8, 2012 Change in Financial Strategy: The Stable Outlook reflects Fitch’s expectations that Celulosa will manage its balance sheet to a targeted debt-to-EBITDA ratio of about 3.0x for the fiscal year ended May 30, 2013. Under a conservative scenario, Fitch estimates the company’s interest coverage to be around 3.0x. Any significant increase in Celulosa’s targeted leverage would threaten credit quality and could result in a negative rating action. 67 Corporates Organizational Structure — Celulosa Argentina S.A. (USD Mil., As of May 31, 2012) LTM May 2012 Summary Statistics EBITDA Cash and Marketable Securities Total Debt Total Debt/EBITDA (x) Net Debt/EBITDA (x) Tapebicuá, Cayman Ltd. (Cayman Islands) 62.3 7.0 156.6 2.5 2.4 100.00% Tapebicuá, LLC. (Delawere) Fanapel Investment Corp. (Bahamas) 15.00% Tapebicuá Investment Co, S.L. (Spain) Celulosa Argentina S.A. (Argentina Paper Division) 97.60% 50.00% Fideicomiso Forestal I 97.74% Coverpel S.A.a Comital S.A.a 98.00% 100 % Fabrica Nacional de Papel S.A. (Uruguay)a 100.00% 66.42% Fideicomiso Tapebicua S.A. 75.50% Casa Hutton S.A.b 2.26% 97.95% 97.74% TC Rey S.A.c Rudaco S.A.c Ivirareta S.A.c 2.05% 2.00% 62.50% Compania Papelera S.A.b 86.60% Suministros Graficos Ltd. (Chile) b aUruguay paper division. bArgentine forestry division. cDistribution network. Source: Fitch and Celulosa Argenitna S.A. Latin America High Yield November 8, 2012 68 Corporates Financial Summary Celulosa Argentina S.A (USD 000, As of May 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2012 2011 2010 2009 2008 62,320 62,320 16.0 0.2 13.3 (0.1) 5.2 65,887 65,887 18.0 18.0 15.6 1.8 13.8 52,058 52,058 17.4 17.4 18.5 12.2 7.1 42,117 42,117 14.8 14.8 13.6 1.8 (34.3) 48,596 48,596 15.9 15.9 14.4 (1.9) 6.8 2.5 3.9 3.9 0.7 0.7 2.5 0.2 0.3 1.0 3.3 4.7 4.7 0.7 0.7 3.3 0.2 0.3 1.4 3.7 3.7 3.7 0.6 0.6 3.7 0.6 0.7 5.9 2.6 2.5 2.5 0.4 0.4 2.6 0.2 0.3 1.5 3.4 4.4 4.4 0.7 0.7 3.4 0.1 0.2 0.7 3.9 2.5 2.4 2.5 2.4 10.3 — 0.5 3.4 2.4 2.3 2.4 2.3 8.6 — 0.5 3.2 3.3 3.2 3.3 3.2 7.5 — 0.4 4.8 4.9 4.8 4.9 4.8 10.8 — 0.4 2.7 2.1 1.9 2.1 1.9 10.8 — 0.5 405,272 7,059 70,934 85,626 156,560 — 156,560 0 156,560 128,374 284,934 394,201 7,048 76,818 79,637 156,455 — 156,455 0 156,455 129,927 286,382 370,684 5,595 67,578 102,043 169,621 — 169,621 0 169,621 110,645 280,266 386,114 6,291 78,918 128,781 207,699 — 207,699 0 207,699 102,939 310,638 394,818 8,065 56,204 46,427 102,631 — 102,631 0 102,631 136,348 238,979 23,745 (4,234) 19,511 0 (19,731) (1,134) (221) 0 (190) 3,502 35 (1,358) 634 31,730 (9,100) 22,630 0 (16,129) (128) 6,501 0 3,138 (7,026) 0 (771) 1,713 38,561 5,583 44,144 0 (7,452) (415) 36,692 0 38 (36,636) 0 (18) (339) 26,330 (11,577) 14,753 0 (9,600) (521) 5,152 0 (68,069) 62,597 0 (499) (1,339) 26,639 (15,621) 11,018 0 (16,870) 0 (5,853) 0 3,592 10,538 0 (2,669) 5,608 389,639 6.6 44,295 16,070 0 6,779 365,657 22.0 47,103 14,044 0 16,547 299,841 5.4 34,768 14,237 0 7,556 284,364 (7.1) 23,768 16,793 0 (41,034) 306,005 32.1 23,246 10,954 0 9,291 Source: Fitch. Latin America High Yield November 8, 2012 69 Corporates Financial Summary Celulosa Argentina S.A. Period-End Exchange Rate Average Exchange Rate (ARS 000, As of May 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.3012 4.0869 3.9860 3.9798 3.9134 3.7990 3.7279 3.4538 3.1631 2012 2011 2010 2009 2008 268,050 268,050 16.0 0.2 13.3 (0.1) 5.2 262,626 262,626 18.0 18.0 15.6 1.8 13.6 203,724 203,724 17.4 17.4 18.5 12.2 7.1 157,009 157,009 14.8 14.8 13.6 1.8 (35.5) 153,714 153,714 15.9 15.9 14.4 (1.9) 6.5 2.5 3.9 3.9 0.7 0.7 2.5 0.2 0.3 1.0 3.3 4.7 4.7 0.7 0.7 3.3 0.2 0.3 1.4 3.7 3.7 3.7 0.6 0.6 3.7 0.6 0.7 5.9 2.6 2.5 2.5 0.4 0.4 2.6 0.2 0.3 1.5 3.4 4.4 4.4 0.7 0.7 3.4 0.1 0.2 0.7 4.1 2.6 2.5 2.6 2.5 10.3 — 0.5 3.5 2.4 2.3 2.4 2.3 8.5 — 0.5 3.3 3.3 3.2 3.3 3.2 7.6 — 0.4 4.9 5.0 4.9 5.0 4.9 10.9 — 0.4 3.0 2.3 2.1 2.3 2.1 10.3 — 0.5 1,833,368 31,935 320,890 387,357 708,247 — 708,247 0 708,247 580,737 1,288,984 1,611,059 28,803 313,949 325,468 639,417 — 639,417 0 639,417 530,997 1,170,414 1,474,842 22,261 268,871 405,999 674,870 — 674,870 0 674,870 440,223 1,115,093 1,466,847 23,901 299,809 489,238 789,047 — 789,047 0 789,047 391,067 1,180,114 1,363,622 27,854 194,116 160,348 354,464 — 354,464 0 354,464 470,919 825,383 102,132 (18,212) 83,920 0 (84,869) (4,878) (949) 0 (819) 15,063 150 (5,840) 2,727 126,476 (36,272) 90,204 0 (64,291) (512) 25,913 0 12,510 (28,006) 0 (3,075) 6,830 150,905 21,847 172,752 0 (29,162) (1,626) 143,590 0 149 (143,372) 0 (69) (1,328) 98,154 (43,159) 54,995 0 (35,787) (1,942) 19,208 0 (253,753) 233,354 0 (1,859) (4,992) 84,261 (49,412) 34,849 0 (53,362) 0 (18,513) 0 11,361 33,332 0 (8,441) 17,739 1,675,915 15.0 190,522 69,122 0 29,156 1,457,510 24.2 187,754 55,980 0 65,955 1,173,399 10.7 136,061 55,716 0 29,570 1,060,082 9.5 88,604 62,604 0 (152,969) 967,925 34.1 73,528 34,649 0 29,388 Source: Fitch. Latin America High Yield November 8, 2012 70 Corporates CEMEX, S.A.B. de C.V. CEMEX España, Rinker Materials Corporation, C5, C8, C10, C10-EUR Captial (SPV) Limited, CEMEX Finance Europe B.V., and CEMEX Finance LLC Full Rating Report Ratings Key Rating Drivers CEMEX, S.A.B. de C.V. and Subsidiaries High Leverage: The ‘B’ ratings of CEMEX S.A.B. de C.V. (CEMEX) and its subsidiaries reflect the company’s high leverage. CEMEX had USD17.629 billion of total debt and USD625 million of cash and marketable securities as of June 30, 2012. During the LTM ended June 30, 2012, CEMEX generated USD2.418 billion of EBITDA. These figures result in a 7.3x total debt/EBITDA ratio and a 7.0x net debt/EBITDA ratio. Foreign Currency Long-Term IDR Senior Secured Debt Senior Unsecured B B+/RR3 B+/RR3 Local Currency Long-Term IDR B National Long-Term Rating Short-Term Rating Senior Unsecured Programa Dual Revolvente de Certificados Bursatiles BB–(mex) B(mex) BB–(mex) BB–(mex) IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Financial Data Cemex, S.A.B. de C.V. (USD Mil.) Revenue Total Adjusted Debt FFO EBITDA Cash and Marketable Securities FFO Adjusted Leverage (x) Adjusted Net Debt/EBITDA EBITDA/Debt Service Coverage (x) 6/30/12 15,125 19,541 251 2,418 2011 15,187 19,846 743 2,339 625 1,158 10.8 8.8 7.0 7.3 1.4 1.2 Leverage to Remain High through Year-End 2014: Fitch expects CEMEX’s leverage to remain high through the end of 2014. Fitch projects that CEMEX will generate about USD2.450 billion of EBITDA in 2012, USD2.550 billion in 2013, and USD2.900 billion in 2014. Fitch projects free cash flow after capex and the payment of coupons on the company’s perpetual notes to be negative USD150 million in 2012, neutral in 2013, and positive USD500 million in 2014. At these levels, absent asset sales, CEMEX’s leverage will continue to be elevated, and the company will need to focus on cost control and liability management. U.S. Market Remains Key to Recovery: CEMEX generated USD2.339 billion of EBITDA during 2011. Its main markets were Mexico (USD1.2 billion), Central and South America (USD513 million), the Mediterranean (USD439 million), and Northern Europe (USD416 million). Cemex’s U.S. operations were very weak in 2011, generating a negative EBITDA of USD100 million. This compares with a pro forma estimated U.S. EBITDA of USD2.6 billion during 2006 — as though Rinker were consolidated. The company’s will not be able to lower leverage until the U.S. recovers and free cash flow exceeds USD1 billion annually. Manageable Debt Amortization Schedule Unless Spring Maturities Triggered: Cemex has a manageable debt amortization schedule due to the refinancing of its 2009 Financing Agreement during September 2012 and the successful issuance of a USD1.5 billion note due in 2022 during October. Following these events, the company has USD137 million of debt maturing in 2013, USD1.2 billion in 2014, and USD1.4 billion in 2015. The amortization schedule then escalates to USD3.1 billion in 2016, USD4.8 billion in 2017, and USD2.7 billion in 2018. Cemex’s new agreement has springing maturities, which could lead to about USD7.4 billion falling due in 2014 if debt outside of the Facilities Agreement dated Sept. 17, 2012 (New Facilities Agreement) is not refinanced, extended, or purchased prior to its maturity date. What Could Trigger a Rating Action Analysts Joe Bormann, CFA +1 312 368-3349 joe.bormann@fitchratings.com Alberto Moreno +52 818 399-9100 alberto.moreno@fitchratings.com Latin America High Yield November 8, 2012 Positive Rating Actions: Positive drivers include the recovery of the anemic U.S. economy and improved demand for cement. A stabilization of risks related to the eurozone would also be positive in terms of improving the overall operating environment of Cemex in Europe and could contribute to a positive rating action in the future. Negative Rating Action: Negative drivers include include a downturn in the company’s businesses in Mexico and Central/South America, which have been crucial to offset weakening of the company’s Northern European division and Mediterranean divisions. Further weakening 71 Corporates in Europe or the U.S. would also have a material impact upon cash flow and could lead to a ratings downgrade. Recovery Rating CEMEX and its subsidiaries have issued debt instruments from Mexico, the U.S., the British Virgin Islands, the Netherlands, and Spain. The guarantors of these instruments are also domiciled in various countries. As a result of the complexity of the company’s capital structure and the various legal jurisdictions, we do not envision a bankruptcy scenario for CEMEX in the event of additional financial distress, as creditors would most likely not want to enter a process with such a high degree of uncertainty regarding the outcome. Fitch’s opinion is that the most likely scenario under additional stress would be a negotiated restructuring of the debt. Consequently, a liquidation analysis was not performed. In deriving a distressed enterprise valuation to determine the recovery under this scenario, we discounted the company’s LTM EBITDA to USD2.0 billion, which is a level that would just cover operating leases, interest expenses, and maintenance capital expenditures. A 20% decline in EBITDA to this level would most likely be driven by a more marked deterioration of the eurozone, which would send the U.S. into a double-dip recession, and have a negative impact upon Cemex’s Mexican operations. Currently, the strong performance of CEMEX’s Central America, South America, and Caribbean operations, and the gradual improvement of its U.S. operations, have been able to offset the negative cash flow trajectory of its Mediterranean operations, comprised mainly of Egypt and Spain, as well as its Northern European division. We applied a 6x distressed EBITDA multiple. This is a conservative multiple. CEMEX sold its business in Australia to Holcim during 2009 for a multiple of about 9x the estimated EBITDA during 2009 of USD200 million or 8x the estimated 2008 EBITDA of USD265 million. The low 6.0x multiple reflects the high leverage within the industry, which would hamper a competitive bidding process. It also reflects the fact that if Europe would deteriorate to the point that the U.S. entered a double-dip recession, the core operations of some potential bidders would also be hemorrhaging cash, limiting their ability to pursue the purchase of CEMEX or some of its larger assets. Regarding the specifics of the recovery analysis, the subordinated debt consists of the subordinated convertible instruments. The priority bank debt consists of the bank debt CEMEX has with Bancomex, which is secured by property, plant, and equipment. The Euro 2014 notes have been included in the debt categorized as senior secured despite not having the security package of the New Facilities Agreement. These notes were issued by Cemex Financed, Europe B.V. and only have Cemex Espana as a guarantor. The treatment of them in this manner reflects their relatively favorable position in the amortization schedule, which should give them a degree of negotiating power in the event of a restructuring. Latin America High Yield November 8, 2012 72 Corporates Recovery Analysis CEMEX, S.A.B. de C.V. (USD Mil.) Going Concern Enterprise Value June 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Adminstrative Claims (10%) Adjusted Enterprise Value for Claims 2,487 20 1,990 6.0 11,938 1,500 250 300 1,950 11,938 1,194 10,744 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims 10,744 10,744 — Distribution of Value Secured Priority Priority Bank Debt Senior Secured Unsecured Priority Subordinated Lien 117 15,127 Lien 2,007 Value Recovered 117 10,627 Recovery (%) 100 70 Concession Allocation Value (%) Recovered Recovery (%) 0 100 Recovery Rating RR1 RR3 Recovery Rating RR6 Notching +3 +1 Notching (2) Rating BB B+ Rating CCC Source: Fitch Ratings. Latin America High Yield November 8, 2012 73 Corporates Organizational Structure — CEMEX, S.A.B. de C.V. (USD Mil., Unless Otherwise Stated) 2011 Summary Statistics 2,339 of EBITDA $1,196 Mexico ($100) United States $416 Northern Europe $513 Central and South America, Caribbean $439 Mediterranean $81 Asia ($206) Others CEMEX, S.A.B. de C.V. (Mexico) $41 Sr. Secured Certificados Bursátiles $800 Sr. Secured Floating Rate Notes Due 2015 $1,650 Sr. Secured Notes Due 2018 $715 Convertible Subordinated Notes Due 2015 $978 Convertible Subordinated Notes Due 2016 $690 Convertible Subordinated Notes Due 2018 $500 Proposed Sr Secured Exchange Notes due 2018 100% CEMEX Mexico, S.A. de C.V. (Mexico) 100% Empresas Tolteca de Mexico, S.A. de C.V. (Mexico) 100% Balance Sheet as of June 30, 2012 $625 Cash and Marketable Securities Centro Distribuidor de Cement, S.A. de C.V. (Mexico) $17,629 of Total Debt 100% $7,156 Subject to Financing Agreement $41 Certificados Bursatiles $9,501 International Fixed Income Debt $462 Perpetual Notes $469 Other Subsidiary Bank Debt New Sunward Holding B.V. (Netherlands) $1,068 Sr. Secured Notes Due 2020 EUR115 Sr. Secured Notes Due 2017 $704 and EUR179 Sr Secured Notes due 2019 CEMEX Finance LLC (USA) $1,750 Sr. Secured Note Due 2016 EUR350 Sr. Secured Note Due 2017 100% 100% CEMEX España, S.A. (Spain) (issued through Luxembourg branch) 100% New Sunward Holding Financial Ventures B.V. (Netherlands) 100% 100% CEMEX Corp (USA) 100% C-10, Perpetual, EUR730 Dual Currency Notes (EUR81 Outstanding) C-8, Perpetual, $750 Dual Currency Notes ($140 Outstanding) C-5, Perpetual, $350 Dual Currency Notes ($66 Outstanding) C-10, Perpetual, $900 Dual Currency Notes ($184 Outstanding) (British Virgin Islands) 100% CEMEX Finance Europe B.V. (The Netherlands) 100% Multiple International Subsidiaries EUR900 Unsecured Notes Due 2014 (EUR 430 Outstanding) 100% CEMEX Inc. (USA) 100% CEMEX Materials LLC (USA) $150 Rinker Unsecured Notes Due 2025 Source: Fitch and CEMEX, S.A.B. de C.V. financial statements. Latin America High Yield November 8, 2012 74 Corporates Financial Summary CEMEX, S.A.B. de C.V. Period-End Exchange Rate Average Exchange Rate (USD Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Total Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 12.8099 12.6676 13.9298 12.4407 12.3507 12.629 13.0811 13.5002 13.6944 11.1635 LTM 3/31/12 2011 2010 2009 2008 2,418 2,661 16.0 17.6 6.5 2.2 (9.5) 2,339 2,596 15.4 17.1 6.7 1.8 (10.3) 2,321 2,521 16.4 17.9 8.7 7.3 (8.0) 2,678 2,923 18.3 19.9 6.8 6.0 0.7 4,367 4,567 20.0 21.0 8.4 1.2 1.4 1.2 1.5 1.5 1.4 1.4 1.1 1.1 1.5 2.1 1.5 1.5 1.5 1.2 1.2 1.4 0.9 1.5 1.6 2.0 1.6 1.6 1.2 1.2 1.9 1.3 1.7 2.9 1.9 2.2 2.0 1.5 1.4 1.7 1.2 1.8 2.3 4.0 4.8 4.1 0.6 0.6 3.5 0.2 0.3 1.5 10.8 7.3 7.0 7.3 7.1 8.7 8.8 7.8 7.3 7.6 7.2 8.4 6.9 7.7 7.4 7.7 7.4 7.6 9.4 7.2 6.8 7.2 6.9 5.8 6.0 5.0 4.8 5.1 4.9 4.1 38,356 625 111 17,518 17,629 17,251 11,462 31,002 39,362 1,158 383 17,858 18,241 18,241 13,973 33,820 41,706 676 466 17,438 17,903 17,903 15,982 35,315 44,514 1,078 594 18,754 19,348 19,348 16,643 37,760 45,538 993 6,957 15,053 22,010 — 14,296 37,450 251 390 641 — (310) — 331 120 20 (142) 1 (429) (100) 743 1 744 — (478) — 267 99 258 458 1 (458) 625 1,386 196 1,582 — (544) — 1,037 93 304 (761) 0 (91) 582 1,045 372 1,416 76 (615) — 877 1,564 (526) (2,653) 1,774 (862) 175 2,738 63 2,801 0 (1,903) (628) 270 971 (123) (494) 609 (792) 442 15,125 (0.9) 1,079 1,562 244 (1,296) 15,187 7.6 963 1,522 257 (1,537) 14,115 (3.7) 859 1,419 200 (1,308) 14,652 (32.7) 1,173 1,201 245 104 21,785 1 2,498 916 201 204 Source: Fitch Ratings. Latin America High Yield November 8, 2012 75 Corporates Financial Summary CEMEX, S.A.B. de C.V. (MXN Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Short-term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 31,719 34,914 16.0 17.6 6.5 2.2 (10.0) 29,102 32,297 15.4 17.1 6.7 1.8 (9.8) 29,317 31,838 16.4 17.9 8.7 7.3 (8.0) 36,153 39,458 18.3 19.9 6.8 6.0 0.7 48,748 50,987 20.0 21.0 8.4 3.3 1.2 1.2 1.5 1.5 1.4 1.4 1.1 1.1 1.5 2.1 1.5 1.5 1.5 1.2 1.2 1.4 0.9 1.6 1.6 2.0 1.6 1.6 1.2 1.2 1.9 1.3 1.7 2.9 1.9 2.2 2.0 1.5 1.4 1.7 1.2 1.8 2.3 4.0 4.8 4.1 0.5 0.5 3.5 0.2 0.3 1.3 9.7 7.4 7.2 7.5 7.2 0.1 0.0 8.8 8.7 8.2 8.6 8.1 0.1 0.0 6.3 7.5 7.3 7.5 7.2 0.1 0.0 8.2 7.0 6.6 7.0 6.6 0.1 0.0 7.4 6.2 5.9 6.2 6.0 0.0 0.3 512,904 8,351 1,486 234,254 235,740 25,560 261,300 153,267 414,567 548,299 16,128 5,333 248,754 254,087 22,365 276,452 194,648 471,100 515,097 8,354 5,750 215,369 221,119 17,647 238,766 197,393 436,159 582,286 14,104 7,768 245,325 253,093 23,135 276,228 217,711 493,939 623,622 13,604 95,270 206,142 301,412 15,673 317,085 195,772 512,857 3,289 5,121 8,410 — (4,071) — 4,339 1,574 263 (1,861) 11 (5,633) (1,307) 9,241 18 9,259 — (5,943) — 3,316 1,232 3,213 5,702 11 (5,700) 7,774 17,504 2,472 19,976 — (6,875) — 13,101 1,172 3,841 (9,615) 5 (1,148) 7,356 14,102 5,019 19,121 1,023 (8,303) — 11,841 21,115 (7,097) (35,812) 23,953 (11,636) 2,364 30,564 708 31,272 — (23,291) — 7,981 10,845 672 (5,511) 6,794 (15,847) 4,934 198,432 10.4 14,151 20,492 3,195 (17,006) 188,938 6.0 11,983 18,937 3,195 (19,127) 178,260 -9.9 10,843 17,926 2,521 (16,516) 197,801 -18.7 15,840 16,217 3,305 1,409 243,201 2.8 27,884 10,223 2,239 2,278 Source: Fitch. Latin America High Yield November 8, 2012 76 Corporates Cimento Tupi S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B National Long-Term Rating BBB–(bra) Rating Outlooks Business Model Shift a Challenge: The ability of Tupi to complete its capex plan within the budget and on time (by first-quarter 2013) will be key to avoiding negative rating actions. Tupi’s strategy is to expand the unit at its Pedra do Sino plant, which will significantly reduce the company’s reliance on slag and increase total overall production to 3.2 million tons of cement per year by 2014 from 2.4 million. The success of this expansion is crucial to the company’s ongoing activities. Absent this expansion, Fitch Ratings estimates that the company’s annual nominal capacity would be reduced to 1.6 million tons. Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable IDR – Issuer default rating. Financial Data Cimento Tupi S.A. (BRL Mil.) Net Revenue EBITDA CFFO Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) LTM 3/31/12 345.8 54.6 82.6 12/31/11 352.2 63.9 87.5 113.7 375.0 51.9 276.2 6.9 4.3 4.8 3.5 Related Research Fitch Affirms Cimento Tupi’s Ratings (April 2012) Small Business Scale and Exposure to Sector Volatility: The ‘B’ ratings of Cimento Tupi S.A. (Tupi) reflect the volatility of its cash flow generation due to the cyclicality of the cement industry. As a small producer of cement, Tupi lacks geographic diversification, which heightens its risk of a local market downturn. Tupi’s cost structure is higher than the largest integrated Brazilian cement producers. The strong credit profile of these large companies may allow them to pressure prices during a downturn in the industry in an attempt to sustain volumes, which would negatively affect Tupi’s ability to service its debt. Credit Ratio Deterioration Trend and Foreign Exchange Risks: Tupi’s credit metrics will be under pressure until 2013 due to the aforementioned USD150 million capital expenditure program. In May 2011, the company issued a USD100 million note. During 2012, they did an add-on issuance of USD50 million, which was key to supporting the capex program and diminishing refinancing risks. Fitch expects leverage to increase to around 4.5x in 2012 and return to below 4.0x during 2013 when the expansion project is completed. Around 65% of Tupi’s debt is denominated in U.S. dollars and 100% of its cash flow generation is in local currency, creating debt repayment risk in the event of a sharp fall in the value of the Brazilian real versus the U.S. dollar. Favorable Industry Outlook: The Positive Outlook for the cement sector in Brazil, reflecting the expansion of the real estate segment and infrastructure projects, should benefit Tupi’s operations, which are largely dependent upon favorable prices and high capacity utilization levels. Profitability margins should remain relatively flat, however, as a lot of new capacity is being added by the leading cement producers. Tupi’s end market, which is highly oriented toward the refurbishment and construction of homes, should not be materially affected by the high level of infrastructure projects in Brazil, as it is more linked with unemployment and income levels. What Could Trigger a Rating Action Analysts Debora Jalles +55 21 4503-2629 debora.jalles@fitchratings.com Liliana Yabiku +55 11 4504-2208 liliana.yabiku@fitchratings.com Capacity Expansion Delay: A rating downgrade or Negative Outlook could result from a delay in the expected timing of the expansion program. Economic Downturn in Brazil: Tupi’s operations are largely dependent upon favorable cement prices and high capacity utilization levels, which would be affected by a slowdown of the Brazilian economy. Upgrade Unlikely: Given current challenges related to a shift in its business model, an upgrade of Tupi’s ratings is unlikely in the short to medium term. Latin America High Yield November 8, 2012 77 Corporates Recovery Rating Tupi’s recovery rating of ‘RR4’ indicates an anticipated recovery for creditors in the event of default in the range of 31%−50% of current principal and related interest in the event of default. Fitch has performed a liquidation analysis in the event of a bankruptcy, although this scenario seems unlikely. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA by 50% and applied a 5.0x distressed EBITDA multiple. Recovery Analysis Cimento Tupi S.A. (USD Mil.) Going Concern Enterprise Value March 31, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 54,599 50 27,299 5.0 136,498 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Liquidation Value Cash A/R Inventory Net PPE Total 113,681 35,708 37,433 258,782 445,604 Advance Rate 0 80 50 20 Available to Creditors 28,566 18,716 51,756 99,039 29,515 15,000 44,515 136,498 13,650 122,848 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 122,848 122,848 6,142 116,705 Distribution of Value Secured Priority Senior Secured Unsecured Priority Unsecured Lien 0.0 Lien 374,979 Value Recovered Value Recovered 116,705 Recovery (%) 0 Recovery (%) 31 Concession Allocation (%) 100 Recovery Rating Notching Rating Recovery Ratinga RR4 Notching Rating B a The recovery rating of Tupi was capped at ‘RR4’, which is consistent with an average recovery expectation. Fitch caps most of the recovery ratings in Brazil at ‘RR4’ to reflect concern about the ability of creditors to have strong recoveries in the event of default. Source: Fitch Ratings. Latin America High Yield November 8, 2012 78 Corporates Latin America High Yield November 8, 2012 79 Corporates Debt and Covenant Synopsis Cimento Tupi S.A. (Foreign Currency Notes) Overview Issuer Document Date Maturity Date Description of Debt Amount Ranking Financial Covenants Limitation on Debt and Disqualified Stock Cimento Tupi S.A. May 6, 2011 May 11, 2017 Senior Unsecured Notes USD150 Million The notes will be the issuer’s senior unsecured obligations and will rank equally in right of payment with any future senior unsecured indebtedness of the issuer (except those obligations preferred by operation of law) and will be senior to any subordinated indebtedness of the issuer. The notes will effectively rank junior to all secured debt of the issuer to the extent of the value of the assets securing the debt, and will rank junior to all debt of the issuer’s subsidiaries. The issuer will not, and will not permit any restricted subsidiary to, incur any disqualified stock (other than disqualified stock of restricted subsidiaries held by the issuer or a restricted subsidiary, so long as it is so held), provided that the issuer or any of its restricted subsidiaries may incur debt and disqualified stock if, on the date of the incurrence, after giving pro forma effect to the incurrence and the receipt and the application of the proceeds therefrom, the net debt-to-EBITDA ratio shall not exceed 1) 4.25 to 1.0 if such incurrence occurs after the issue date and on or prior to Dec. 31, 2014 and 2) 3.75 to 1.0 if such incurrence occurs on or after Jan. 1, 2015. Notwithstanding the foregoing, the issuer and any restricted subsidiary may incur the following permitted debt: 1) debt of the issuer or a restricted subsidiary so long as such debt is owed to the issuer or a restricted subsidiary and which, if the obligor is the issuer, is subordinated in right of payment to the notes; 2) debt of the issuer or a restricted subsidiary constituting an extension or renewal of, replacement of, or substitution for, or issued in exchange for, or the net proceeds of which are used to repay, redeem, repurchase, refinance, or refund, including by way of defeasance (all of the above, for purposes of this clause, “refinance”) then outstanding debt in an amount not to exceed the principal amount of the debt so refinanced, plus premiums, fees, and expenses. Limitation on Restricted Payments Acquisitions/Divestitures Repurchase upon Change of Control Others Limitations on Sales of Assets Optional Redemption Debt of the issuer or any restricted subsidiary incurred on or after the issue date not otherwise permitted in an aggregate principal amount not to exceed at any one time outstanding the greater of 1) USD15 million and 2) 10% of the issuer’s consolidated net tangible assets. Notwithstanding anything to the contrary in this covenant, the maximum amount of debt that the issuer and its restricted subsidiaries may incur pursuant to this covenant shall not be deemed to be exceeded, with respect to any outstanding debt, solely as a result of fluctuations in the exchange rate of currencies. The issuer will not, and will not permit any restricted subsidiary to, directly or indirectly: 1) declare or pay any dividend or make any distribution on its equity interests, including any payment made in connection with any merger or consolidation involving the issuer or any subsidiary of the issuer (other than) a) dividends or distributions paid in the issuer’s qualified equity interests and b) dividends or distributions by a restricted subsidiary payable, on a pro rata basis or on a basis more favorable to the issuer, to all holders of any class of capital stock of such restricted subsidiary a majority of which is held, directly or indirectly, by the issuer). If a change of control that results in a ratings decline occurs, each holder of the notes may require the issuer to repurchase all or a portion of such holder’s notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The issuer will not, and will not permit any restricted subsidiary to, make any asset sale unless the following conditions are met: 1) The asset sale is for fair market value; 2) at least 75% of the consideration consists of cash or cash equivalents received at closing. At any time prior to May 11, 2015, the issuer may on any one or more occasions redeem the notes, at its option, in whole, at a “make-whole” redemption price equal to 100% of the principal amount of such notes plus the greater of 1) 1% of the then outstanding principal amount of the notes and 2) the excess of a) the present value at such redemption date of i) the redemption price of the notes at May 11, 2015 plus ii) all required interest payments thereon through May 11, 2015 (excluding accrued but unpaid interest to the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 50 basis points, over b) the then outstanding principal amount of the notes; plus in each case any accrued and unpaid interest and additional amounts, if any, on such notes to, but excluding, the redemption date, as calculated by the independent investment banker. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Cimento Tupi S.A. offering memo and Fitch Ratings. Latin America High Yield November 8, 2012 80 Corporates Financial Summary Cimento Tupi S.A. (USD Mil.) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt-Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2008 2009 2010 2011 LTM Ended 6/30/12 49,765 49,765 15.39 15.39 24.61 8.19 25.41 64,498 64,498 18.52 18.52 11.99 16.91 27.07 54,438 54,438 13.55 13.55 12.95 15.82 23.40 63,916 63,916 18.15 18.15 14.52 3.91 20.98 66,063 66,063 19.53 19.53 11.21 (23) 5.81 — — — 0.74 0.74 — 0.39 0.84 3.28 33.38 50.55 50.55 1.75 1.75 33.38 1.63 2.07 6.05 11.92 11.22 11.22 0.98 0.98 11.92 1.23 1.37 5.00 5.35 3.93 3.93 0.98 0.98 5.35 0.46 1.26 1.28 2.86 2.30 2.30 0.69 0.69 2.86 (1.00) 0.20 0.52 1.23 1.87 1.26 1.87 1.26 — — 0.72 1.74 1.15 0.89 1.15 0.89 1.53 — 0.48 1.82 1.94 1.79 1.94 1.79 5.41 — 0.48 3.31 4.50 3.69 4.50 3.69 8.27 0.17 5.27 6.57 5.51 6.57 5.51 8.00 0.15 377,486 30,440 67,613 25,653 93,266 — 93,266 — 93,266 214,210 307,476 381,548 16,252 35,657 38,232 73,889 — 73,889 — 73,889 281,265 355,154 498,413 7,786 50,777 54,590 105,367 — 105,367 — 105,367 341,411 446,778 637,388 51,985 48,931 238,915 287,846 287,846 287,846 311,790 599,636 755,326 69,780 66,667 367,212 433,879 433,879 433,879 300,286 734,165 75,658 (37,596) 38,062 — (11,591) — 26,471 16,376 — (23,118) — — 19,729 41,311 29,264 70,575 — (11,661) — 58,914 2,315 — (75,417) — — (14,188) 53,009 26,405 79,414 — (15,871) — 63,543 (15,875) — (56,456) — — (8,788) 70,790 16,770 87,560 (68,392) (5,402) 13,766 (461) (58,569) 115,462 (25,999) — 44,199 53,517 16,276 69,793 (135,080) (13,957) (79,244) 52,050 (60,855) 82,171 (5,750) (11,628) 323,356 13.62 41,225 — — 48,287 348,342 7.73 57,125 1,276 — 67,055 401,671 15.31 54,438 4,853 — 72,861 352,158 (12) 63,916 16,255 — 68,532 338,239 65,807 28,750 17,562 Source: Company reports. Latin America High Yield November 8, 2012 81 Corporates CLISA Compañía Latinoamericana de Infraestructura y Servicios S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR B Local Currency Long-Term IDR B IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data CLISA (USD Mil.) Revenue EBITDA CFFO Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) CFFO/ Net Debt (x) 6/30/12 12/31/11 (6 Months) (12 Months) 544.0 1,061.4 83.7 145.1 (18.7) 55.3 61.0 345.7 94.3 311.5 2.1 2.1 1.7 1.5 (0.1) 0.3 Note: CLISA changed to IFRS in January 2012. Figures as of June 2012 are sixmonth figures. Ratios have been calculated by annualizing income statement and cash flow items. High Argentine Risk: The ‘B’ ratings of Compañía Latinoamericana de Infraestructura y Servicios S.A. (CLISA) reflect its exposure to the cyclicality of the construction industry in Argentina and the level of public works expenditures. While infrastructure spending requirements in the country remain high, a deceleration in the level of public works or a slower pace of execution is expected due to limits on the government’s available funding. CLISA is also exposed to the collection risk derived from having the government as its main counterparty. The ratings are further limited by the risks associated with generating its EBITDA in Argentina, which is also rated ‘B’. High Regulatory and Political Risks: CLISA’s main activities depend on contractual agreements and government regulations at the national, provincial, and municipal levels. Exposure to regulatory risk derives from the delays in the renegotiations of public service contracts. In particular, CLISA’s subsidiary, Metrovias (mass transportation), has heightened political risk following the national government’s attempt to transfer the subway concession to the city of Buenos Aires. Most of Metrovias’ income was derived from national government subsidies. As of today, there is uncertainty surrounding the legal jurisdiction of the concession, and most of the legal conflicts surrounding this issue are still pending. Fitch Ratings does not expect cash support from CLISA to Metrovias to take place, but acknowledges that the legal issues are affecting the economics of the business with this risk incorporated in the current rating. Cash Flow Growth Driven by Infrastructure Demand: CLISA operates in four main businesses: construction and toll road concessions (through Benito Roggio e Hijos [BRH]), water treatment, waste management (CLIBA), and transportation. Over the last five years, CLISA’s cash flow generation grew steadily, following positive trends for construction, primarily driven by public works expenditure. During fiscal year-end 2011, the group reported sales and EBITDA of USD1,061 million and USD145 million, respectively, an improvement from the USD737 million and USD111 million at fiscal year-end 2010. Construction represented around 50% of consolidated revenues, evidence of important growth in an election year. Strong Market Position Drives Large Backlog: The ratings positively reflect CLISA’s strong market position as one of Argentina’s largest privately owned industrial conglomerates. At the end of June 2012, BRH’s construction backlog was USD918 million (ARS4,150 million), which should provide the company with an important source of cash generation for the next two years. What Could Trigger a Rating Action Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Latin America High Yield November 8, 2012 Downturn in Public Works and Deterioration in Collections: In Argentina, a worsening of the macroeconomic and political environment that could significantly threaten existing levels of infrastructure investments could result in a negative rating action. Other factors that could affect CLISA’s credit profile are deterioration in collections from the government counterparties, the continued negative free cash flow, and an increase in the political risk associated with Metrovias. 82 Corporates Organizational Structure — CLISA Compañía Latinoamericana de Infraestructura y Servicios LTM June 30, 2012 Summary Statistics USD 83.7 Million of EBITDA (6 Months) USD 61.0 Million of Cash and Marketable Securities USD 345.7 Million of Total Debt Roggio S.A. 97.5% CLISA S.A. 2.4% Inversar S.A. 23.1% 46.2% Polledo S.A.I.C. y F. 31.8% Covimet S.A. 29.5% 61.2% ACSA 97.1% 99.9% 97.2% Benito Roggio e Hijos S.A. 48.2% Benito Roggio Ambiental S.A. 49.2% Benito Roggio Transporte S.A. Tecsan 18.7% Metrovias Coviares S.A. 40.0% Others Roggio Brasil Investimentos 90.7% 95.0% CLIBA 99.9% Taym 60.0% 33.3% UGOFE Others Others Source: Fitch and Companía Latinoamericana de Infraestructura y Servicios S.A. Latin America High Yield November 8, 2012 83 Corporates Financial Summary Compañía Latinoamericana de Infraestructura y Servicios S.A. (CLISA) Period-End Exchange Rate Average Exchange Rate (USD 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Non-Recurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 4.5238 4.4110 4.3053 4.1295 3.9787 3.9134 3.7990 3.7279 3.4538 3.1631 3.1500 3.1165 3.0905 3.0861 6 Months 6/30/12 2011 2010 2009 2008 83,772 15.4 145,092 13.7 0.3 (0.0) 0.0 110,920 15.0 33.6 (3.6) 16.5 86,008 15.6 41.7 6.2 16.7 74,134 12.4 24.7 5.2 (37.1) 65,649 11.8 24.2 (7.2) 1.6 54,060 12.0 14.4 (5.6) 2.6 2.5 2.9 0.8 2.5 (0.3) (0.0) (0.4) 2.8 3.0 0.7 2.8 0.2 0.6 0.9 3.2 3.1 0.8 3.2 0.1 0.7 0.2 3.1 2.5 0.9 3.1 0.7 1.7 2.1 2.1 2.3 0.7 2.1 0.6 1.2 1.8 2.4 2.4 0.7 2.4 (0.1) 0.3 (0.2) 1.9 2.6 0.6 1.9 (0.1) 0.8 (0.1) 2.5 2.1 1.7 17.1 0.5 2.3 2.1 1.5 16.7 0.5 2.3 2.4 1.7 15.9 0.4 1.8 2.2 1.1 17.8 0.3 2.9 2.6 1.7 33.0 0.4 3.1 3.0 2.3 15.8 0.4 5.3 3.8 2.3 16.1 0.3 1,048,329 61,038 159,500 186,230 345,730 0 345,730 128,621 474,351 901,292 94,379 158,349 153,162 311,511 0 311,511 85,008 396,519 796,637 82,974 106,305 160,112 266,417 0 266,417 77,169 343,586 603,306 92,449 57,845 132,802 190,647 0 190,647 58,430 249,077 598,649 68,078 77,175 117,932 195,107 0 195,107 54,150 249,257 546,937 39,843 71,040 122,853 193,893 0 193,893 64,444 258,337 547,226 80,294 70,598 133,406 204,004 0 204,004 65,647 269,651 41,974 (60,738) (18,764) 0 (43,601) 0 (62,365) 1,084 (7,607) 36,899 0 1,765 (30,223) 88,410 (33,035) 55,375 0 (60,996) (3,382) (9,004) (767) (355) 50,459 0 (17,048) 23,286 81,087 (75,845) 5,242 0 (31,570) 0 (26,328) (1,516) (6,638) 51,091 0 (8,872) 7,738 71,442 (7,035) 64,407 0 (30,169) 0 34,238 895 (6,643) 2,028 75 (15,099) 15,492 35,160 33,522 68,682 0 (37,881) 0 30,801 1,940 (512) 4,329 0 (7,269) 29,290 36,387 (44,076) (7,689) 0 (32,142) 0 (39,831) (774) (2,914) 41,510 0 (3,678) (5,686) 18,177 (20,083) (1,906) 0 (23,323) 0 (25,229) (884) (1,277) 89,088 0 1,455 63,153 544,016 69,634 28,398 15,900 1,061,392 44 116,664 48,204 2,613 737,121 34 86,391 36,290 11,203 550,192 (8) 66,209 34,340 9,423 595,933 554,594 53,460 32,168 (10,058) 41,556 26,804 1,022 450,153 123.2 32,359 20,614 1,506 6 Months 12/31/07 6/30/07 Note: Numbers may not add due to rounding. Source: Fitch Ratings and Compañía Latinoamericana de Infraestructura y Servicios S.A. Latin America High Yield November 8, 2012 84 Corporates Financial Summary Compañía Latinoamericana de Infraestructura y Servicios S.A. (CLISA) (ARS 000,Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Net Income 6 Months 6/30/12 2011 2010 2009 2008 6 Months Ended 12/31/07 6/30/07 369,519 15.4 599,156 13.7 33.0 (0.8) 3.2 434,073 15.0 33.6 (3.6) 16.6 320,628 15.6 41.7 6.2 17.2 234,492 12.4 24.7 5.2 (34.0) 204,594 11.8 24.2 (7.2) 1.6 166,835 12.0 14.4 (5.6) 2.6 2.5 2.9 0.8 2.5 (0.3) (0.0) (0.4) 2.8 3.0 0.7 2.8 0.2 0.6 0.9 3.2 3.1 0.8 3.2 0.1 0.7 0.2 3.1 2.5 0.9 3.1 0.7 1.7 2.1 2.1 2.3 0.6 2.1 0.5 1.2 1.8 2.4 2.4 0.7 2.4 (0.1) 0.3 (0.2) 1.9 2.6 0.6 1.9 (0.1) 0.8 (0.1) 2.5 2.1 1.7 17.0 0.5 2.4 2.2 1.6 16.6 0.5 2.3 2.4 1.7 15.9 0.4 1.8 2.3 1.2 18.3 0.3 3.2 2.9 1.9 30.2 0.4 3.1 3.0 2.4 15.9 0.4 5.3 3.8 2.3 16.1 0.3 4,742,429 276,123 721,547 842,468 1,564,015 1,564,015 581,855 2,145,870 3,880,331 406,331 681,741 659,408 1,341,149 0 1,341,149 365,985 1,707,134 3,169,578 330,130 422,957 637,037 1,059,994 0 1,059,994 307,033 1,367,027 2,291,961 351,214 219,755 504,516 724,271 0 724,271 221,975 946,246 2,067,613 235,128 266,548 407,313 673,861 0 673,861 187,022 860,883 1,722,852 125,506 223,777 386,988 610,765 0 610,765 202,998 813,763 1,691,202 248,148 218,184 412,291 630,475 0 630,475 202,883 833,358 185,149 (267,916) (82,767) 0 (192,323) 0 (275,090) 4,783 (33,553) 162,761 — 7,784 (133,315) 365,089 (136,419) 228,670 0 (251,884) (13,966) (37,180) (3,166) (1,468) 208,371 0 (70,398) 96,159 317,324 (296,810) 20,514 0 (123,545) 0 (103,031) (5,933) (25,976) 199,941 0 (34,721) 30,280 266,329 (26,226) 240,103 0 (112,468) 0 127,635 3,335 (24,766) 7,559 280 (56,289) 57,754 111,214 106,035 217,249 0 (119,821) 0 97,428 6,137 (1,618) 13,694 0 (22,993) 92,648 113,399 (137,364) (23,965) 0 (100,169) 0 (124,134) (2,412) (9,080) 129,366 0 (11,461) (17,721) 56,096 (61,979) (5,883) 0 (71,976) 0 (77,859) (2,729) (3,942) 274,936 0 4,490 194,896 2,399,654 — 307,156 125,263 70,133 4,383,017 51.9 481,764 199,057 10,792 2,884,649 40.6 338,084 142,018 43,843 2,051,059 8.8 246,819 128,017 35,129 1,884,995 9.06 169,099 101,750 (31,813) 1,728,393 129,508 83,535 3,185 1,389,217 129.6 99,862 63,617 4,649 Note: Numbers may not add due to rounding Source: Fitch Ratings and Compañía Latinoamericana de Infraestructura y Servicios S.A. Latin America High Yield November 8, 2012 85 Corporates Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. (Transener) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Notes due 2016 Senior Notes due 2021 CCC CCC/RR4 CCC/RR4 Local Currency Long-Term IDR CCC Low Financial Flexibility: The potential absence of payments agreed with the regulator over the next 12 to 18 months could put pressure on the company’s ability to meet operating and capital expenditures during 2013. Fitch expects that the company’s internally generated funds and liquidity position of ARS115 million as of March 30, 2012 will be sufficient to meet this year’s remaining debt interest servicing requirements and capital expenditures. IDR – Issuer default rating. Financial Data Compañia de Transporte de Energia Electrica en Alta Tension Transener S.A. (USD Mil.) 3/31/12a Revenue 28 EBITDA (3) Cash Flow from Operations (10) Cash and Marketable Securities 26 Total Debt 153 Total Debt/EBITDA (x) (11.4) Net Debt/EBITDA (x) (9.5) a b Weak Operating Profile: Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A.’s (Transener) low profitability and cash generation are the direct result of freeze-in tariff increases since 2002 within a context of double-digit inflation in Argentina. Fitch Ratings anticipates that EBITDA could be negative in 2012. FCF generation is also likely to remain negative. 12/31/11b 152 33 ,262 32 155 4.7 3.7 IFRS. Local GAAP. Note: Transener changed to IFRS in January 2012. Figures as of March 2012 are three-month figures. Ratios have been calculated by annualizing income statement and cash flow items. Reliance on Funds from Government: Transener has partially relied on disbursements from the Wholesale Electric Market Administrator (CAMMESA) to face its operating needs and capital expenditures during 2010 and 2011. These disbursements were made under an agreement reached between the company, the Ente Nacional Regulador de la Electricidad (ENRE) and the Secretary of Energy in December 2010 on the amount of cost increases Transener had in the period from June 2005 to November 2010. Uncertainty in Disbursements Received: The timing of receiving disbursements is uncertain and subject to the discretion of the regulator and availability of funds at CAMMESA. Transener has received, as of March 2012, approximately 24% of the amount agreed, reflecting a high degree of uncertainty with respect to government funding. High Regulatory Risk: Transener’s full-tariff review has been pending since 2002, highlighting its exposure to regulatory risk. This exposure is partially offset by the company’s strong competitive position as the largest transmitter of high voltage electricity in Argentina, and its priority of payment from its offtaker, CAMMESA. Exposure to Convertibility and Exchange-Rate Risk: The majority of Transener’s income is denominated in Argentine pesos, while its debt is denominated in U.S. dollars, exposing the company to transfer and convertibility risk. Analysts Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Gabriela Curutchet +54 11 5235-8100 gabriela.curutchet@fitchratings.com High Leverage: For the first three months of 2012, annualized total and net debt/EBITDA ratios were negative, indicating a worsening trend. Mitigating the company’s high leverage, Transener has a favorable debt amortization schedule with no major maturities until 2021. What Could Trigger a Rating Action Deterioration of the Sovereign’s Credit Quality: Deterioration of Argentina’s credit quality could result in a negative rating action as CAMMESA’s credit quality is closely linked to Argentina’s. The electricity system relies on public subsidies to fulfill its obligations. Erosion of Liquidity: A significant deterioration in the company’s liquidity could result in a Negative Outlook or rating action. Positive Tariff Review: A tariff increase could result in a Positive Outlook or rating action for the company. Latin America High Yield November 8, 2012 86 Corporates Recovery Rating The recovery ratings for Transener’s capital markets debt instruments reflect Fitch’s expectation that the company’s creditors will have an average recovery constrained by the soft cap of ‘RR4’ for bonds issued by corporates domiciled in Argentina. Recovery Analysis Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. (Transener) (USD Mil.) IDR: CCC Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value (13.4) 35 (8.7) 5.0 (43.6) Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 13.3 — 15.0 28.3 Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 26.0 35.7 — 339.0 400.7 Advance Available to Rate (%) Creditors 0 — 65 23.2 55 — 40 135.6 158.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 158.8 15.9 142.9 Distribution of Value Secured Priority Senior Secured Secured Lien 0.0 0.0 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecured Unsecured Lien 153.6 — Value Recovered — — Recovery (%) 0 0 Recovery Rating — — Notching — — Rating — 142.9 — 142.9 7.1 135.8 Value Recovered 142.9 — Recovery (%) 93 — Concession Allocation (%) 100 — Recovery Rating RR4 — Notching 0 — Rating CCC — Source: Fitch. Latin America High Yield November 8, 2012 87 Corporates Organizational Structure — Compañia de Transporte Eléctrica en Alta Tensión S.A. (Transener) (As of LTM March 31, 2012) Pampa Energía S.A. Electroingeniería S.A. ENARSA 50% 25% 25% Citelec S.A. Public Float 53% 47% Transener S.A. EBITDA, March 2012 (3 Months, Annualized): USD(13.4) Million Consolidated Total Debt: USD153 Million Total Debt/EBITDA: (11.4x) Net Debt/EBITD: (9.5x) 90% Transba S.A. 99% Transener Internacional S.A. Source: Transener and subsidiaries’ financial statements, and Fitch. Latin America High Yield November 8, 2012 88 Corporates Debt and Covenant Synopsis Compañía de Transporte de Energia Electrica en Alta Tension Transener S.A. (Transener) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration PIK Interest Rate Intercompany Loans Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Compañía de Transporte de Energia Electrica en Alta Tension Transener S.A. (Transener) N.A. — Debt is Senior Unsecured Dec. 20, 2006 Dec. 15, 2016 Senior Unsecured Notes N.A. N.A. Change of control clause at 100% of principal. Change of control means that the Argentine government directly or indirectly owns over 50% of Transener’s voting rights. The company and its affiliates might sell assets as long as 75% of the asset sale is paid in cash. The issuer is not allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. Transener can incur or maintain up to USD30 million of additional indebtedness if following such transaction interest coverage is above 2.0x and consolidated debt to EBITDA is below 3.75x. This figure is USD10 million for Transener’s subsidiaries. Debt can also be incurred to finance trade receivables, in connection with hedging agreements, and in respect to certain intercompany loans under certain conditions. The issuer and its subsidiaries are allowed to incur in customary permitted liens related to the normal course of business. These include a maximum outstanding debt of USD10 million. The issuer is prohibited from making dividend payments and from making certain investments, including the acquisition of stocks. The issuer is allowed to make restricted payments for up to USD20 million as long as it is in full compliance with the terms and conditions of the notes. N.A. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. N.A. Intercompany loans are permitted and are not subordinated to the notes. The issuer may rescue the notes since Dec. 15, 2011 at par value plus 0.5 of annual interest rate in 2011, par value plus 0.25 of annual interest rate in 2012, at par value plus 0.125 of annual interest rate in 2013, and at par value in 2014 and on. Transactions between the issuer and affiliates for over USD5 million require approval from the board of directors and above USD20 million require a fairness opinion. Restrictions on merger of issuer and subsidiaries. Exceptions include that the surviving entity will be a corporation existing under the laws of Argentina or United States, no event of default occurs or is continuing, the company’s pro forma debt levels allow it to incur additional indebtedness. Any surviving entity would assume all obligations of issuers under the indenture. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 89 Corporates Debt and Covenant Synopsis Compañía de Transporte de Energia Electrica en Alta Tension S.A. (Transener) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration PIK Interest Rate Intercompany Loans Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Compañía de Transporte de Energia Electrica en Alta Tension Transener S.A. (Transener) N.A. — Debt is Senior Unsecured Aug. 2, 2011 Aug. 15, 2021 Senior Unsecured Notes N.A. N.A. Change of control clause at 101% of principal. The company and its affiliates might sell assets as long as 75% of the asset sale is paid in cash. The issuer is not allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. Transener can incur or maintain up to USD30 million of additional indebtedness if following such transaction interest coverage is above 2.0x and consolidated debt to EBITDA is below 3.75x. This figure is USD10 million for Transener’s subsidiaries. Debt can also be incurred to finance trade receivables in connection with hedging agreements, and in respect to certain intercompany loans under certain conditions. The issuer and its subsidiaries are allowed to incur in customary permitted liens related to the normal course of business. These include a maximum outstanding debt of USD10 million. The issuer is prohibited from making dividend payments and from making certain investments, including the acquisition of stocks. The issuer is allowed to make restricted payments for up to USD20 million as long as it is in full compliance with the terms and conditions of the notes. N.A. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. N.A. Intercompany loans are permitted and are not subordinated to the notes. The issuer may elect to redeem the notes at any time after the fifth anniversary of the date of issuance, inclusive, in its entirety, not partially, rescue at the following prices, expressed as percentages of nominal value: 2016 100% + 50% of coupon, 2017 100% + 25% of coupon, 2018 100% + 12,5% of coupon, 2019 and thereafter 100%. Transactions between the issuer and affiliates for over USD5 million require approval from the board of directors, and above USD20 million require a fairness opinion. Restrictions on merger of issuer and subsidiaries. Exceptions include that the surviving entity will be a corporation existing under the laws of Argentina or United States, no event of default occurs or is continuing, the company’s pro forma debt levels allow it to incur additional indebtedness. Any surviving entity would assume all obligations of issuers under the indenture. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 90 Corporates Financial Summary Compañía de Transporte de Energía Eléctrica en Alta Tensión Transener S.A. (Transener) (BRL Mil., As of Dec. 31) Period-End Exchange Rate Average Exchange Rate Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Inv. and Fin.) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.3786 4.3584 LTM 3/31/12 4.3053 4.1295 2011 4.3053 4.1295 2010 3.9787 3.9134 2009 3.7990 3.7279 2008 (3,355) (12.0) — — — 33,184 0.2 0.1 (0.1) (0.1) 54,464 36.5 7.7 (1.7) 2.1 48,801 31.2 12.6 13.3 4.2 47,209 32.7 10.3 (3.3) (6.3) (0.4) (0.7) (0.1) (0.4) (1.3) (0.3) (4.1) 1.7 1.7 1.4 1.7 0.3 1.6 0.0 1.7 2.8 1.7 1.7 0.5 1.3 0.8 2.9 2.5 1.5 2.9 1.2 1.7 2.0 2.6 2.1 2.0 2.6 0.7 1.0 0.9 (19.8) (11.4) (9.5) — — 13.0 — 0.0 4.7 4.7 3.7 4.7 3.7 0.1 — 0.0 4.4 2.7 2.2 2.7 2.2 12.6 — 0.1 2.8 3.2 2.9 3.2 2.9 10.6 — 0.1 3.6 4.5 4.4 4.5 4.4 10.1 — 0.0 367,830 26,233 7,311 146,047 153,358 0 153,358 0 153,358 137,426 290,784 455,161 32,046 4,305 150,251 154,556 0 154,556 0 154,556 244,979 399,535 494,344 27,043 13,212 134,338 147,550 0 147,550 0 147,550 282,994 430,544 529,577 16,412 13,619 144,322 157,941 0 157,941 0 157,941 290,666 448,607 587,704 6,244 1,393 211,406 212,799 0 212,799 0 212,799 307,120 519,919 (6,942) (4,006) (10,948) 0 (2,655) 0 (13,603) 0 0 3,671 0 0 (9,932) 13,919 (13,658) 262 0 (13,005) 0 (12,744) 0 (6,037) 3,681 0 22,279 7,179 14,227 (4,710) 9,517 0 (11,977) (67) (2,527) 0 (1,525) (8,576) 0 24,054 11,425 37,716 3,264 40,980 0 (20,267) 0 20,713 0 71 (20,565) 0 10,624 10,844 36,065 (6,740) 29,325 0 (34,031) (60) (4,766) 0 1,757 (12,000) 0 0 (15,009) 28,060 0.0 (7,765) 5,003 0 (3,909) 152,139 2.0 3,492 19,230 0 (16,534) 149,169 (4.5) 23,279 19,265 0 5,930 156,267 8.1 15,880 19,706 0 12,550 144,493 (10.8) 11,115 22,623 0 (20,829) Source: Fitch. Latin America High Yield November 8, 2012 91 Corporates Corporacion Electrica Nacional S.A. (CORPOELEC) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term FC IDR Long-Term LC IDR Senior Unsecured B+ B+ B+/RR4 FC – Foreign currency. LC – Local currency. IDR – Issuer default rating. Rating Outlooks Long-Term LC and FC IDR Negative Ratings Linked to the Government: Corporacion Electrica Nacional S.A.’s (CORPOELEC) ratings reflect its ownership by the Republic of Venezuela, to which its ratings are tied. The company is overseen by the Ministry of Popular Power for Electricity (MPPE), its sole shareholder. CORPOELEC has a public mandate to operate the nation’s electricity sector according to the planning directives of the MPPE and depends on public sector transfers for the sustainability of its operations. Monopolistic Position: CORPOELEC is a vertically integrated public utility responsible for the operation of the country’s electricity assets and the provision of electricity services in Venezuela. CORPOELEC was created in 2007 when the government nationalized the electricity sector. The entity absorbed all of the country’s generation assets along with its transmission, distribution, and electric power retail infrastructure during the period 2010 to 2011. This provided CORPOELEC with an installed capacity of 25,655 MW and a client base of 5.7 million users as of December 2011. Negative Operational Results Expected to Continue: The current tariff regime has been in place since 2002, and no tariff adjustments are expected in the near future. This situation will exacerbate CORPOELEC’s negative operational performance and will increase its dependence on public funding going forward. This status quo will continue to erode the entity’s credit profile on a standalone basis. Sovereign Support Needed to Fund Capex: The company receives explicit support from both the central government through operational and capital expenditure allocations contained in the nation’s budget, and from PDVSA in the form of subsidized fuel costs. CORPOELEC received USD3.4 billion of government financing split across various agencies in 2011. For 2012, CORPOELEC’s capex will be financed with funds from the special indebtedness law, as contained in the national budget, for approximately USD2.2 billion in addition to financing from other government sources. These funds will be used to combine 4,329 MW of thermoelectric generation capacity and associated infrastructure in 2012. Liquidity Depends on Public Sector’s Current Transfers: CORPOELEC received USD540 million in current transfers in order to cover operational costs during 2011. For 2012, the company has resources earmarked from the national budget totaling USD980 million to meet its day to day operations. Analysts Julio Ugueto +58 212 286-3356 julio.ugueto@fitchratings.com Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Latin America High Yield November 8, 2012 Pro Forma Debt Structure: At Dec. 31, 2011, CORPOELEC’s pro forma financial long-term debt was USD6,688 million, of which USD663 million constituted the absorbed EDC bond issuance, rated ‘B+/RR4’ by Fitch. C.A. La Electricidad de Caracas’ (EDC) USD663 million senior unsecured bond issuance due 2014 and 2018 is now a direct obligation of CORPOELEC as the latter took control of EDC on Dec. 22, 2011. EDC ceased to exist in April 2012. CORPOELEC’s audited 2011 financial statements were not available at the time of publication. What Could Trigger a Rating Action Key Rating Drivers: A downgrade of the sovereign or lack of sovereign support would lead to a downgrade of CORPOELEC’s ratings. An upgrade of the sovereign would be viewed positively and could lead to a positive rating action. 92 Corporates Recovery Analysis Fitch’s “Country-Specific Treatment of Recovery Ratings” criteria published June 15, 2012 has been used to cap the rating at ‘RR4’. In this criteria report, Venezuela is categorized as a Group D jurisdiction, which has a soft cap for recovery ratings at ‘RR4’. Organizational Structure — CORPOELEC República Bolivariana de Venezuela Ministerio del Poder Popular para la Energía Eléctrica Corporacion Electrica Nacional S.A. (CORPOELEC) Administradora Serdeco C.A. EDC Network Comunicaciones S.C.S. Comunicaciones Moviles ‘‘Conmovil’’ Proccedatos Aracoy Source: CORPOELEC. Latin America High Yield November 8, 2012 93 Corporates Debt and Covenant Synopsis CORPOELEC (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidation, Merger, Conveyance or Sale EDC Finance B.V. CORPOELEC April 10, 2008 April 10, 2018 Senior Unsecured Notes CORPOELEC will not, in one or a series of transactions, consolidate or amalgamate with or merge into any corporation or convey, lease or transfer substantially all of its properties, assets or revenues to any person or entity (other than a direct or indirect subsidiary of the issuer) or permit any person (other than a direct or indirect subsidiary of the issuer) to merge with or into it unless: 1) Limitation on Liens Either the issuer is the continuing entity, or the person (the "successor company") formed by the consolidation or into which the issuer is merged or that acquired or leased the property or assets of the issuer will assume (jointly and severally with the issuer unless the issuer will have ceased to exist as a result of that merger, consolidation, or amalgamation), by a supplemental indenture (the form and substance of which will be previously approved by the Trustee), all of the issuer’s obligations under the indenture and the notes; 2) The successor company (jointly and severally with the issuer unless the issuer will have ceased to exist as part of the merger, consolidation or amalgamation) agrees to indemnify each holders of notes against any tax, assessment or governmental charge thereafter imposed on the holders of notes solely as a consequence of the consolidation, merger, conveyance, transfer or lease with respect to the payment of principal of, or interest, the notes; 3) Immediately after giving effect to the transaction, no default or event of default has occurred and is continuing; 4) The issuer has delivered to the trustee an Officer’s Certificate and an Opinion of Counsel, each stating that the transaction and the supplemental indenture, comply with the terms of the indenture and that all conditions precedent provided for in the Indenture and relating to the transaction have been complied with. CORPOELEC will not, and will not cause or permit any of its subsidiaries to, incur, permit or suffer to exist any liens (the "Initial Lien"), other than permitted liens, of any kind against or upon any property or assets of the issuer or any of its subsidiaries whether owned on the issue date or acquired after the issue date, to secure any indebtedness, unless it has made or will make effective provision whereby 1) the notes will be secured by such lien equally and ratably with (or prior to, in the event such indebtedness is subordinated in right of payment to the notes) all other indebtedness of the issuer or any of its subsidiaries secured by such lien and 2) if such lien secures obligations subordinated to the notes in right of payment, such lien shall be subordinated to a lien securing the notes in the same property as that securing such lien to the same extent as such subordinated obligations are subordinated to the notes. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 94 Corporates Corporacion Pesquera Inca SAC (Copeinca) Full Rating Report Key Rating Drivers Ratings Copeinca Foreign Currency Foreign Currency Long-Term IDR Senior Unsecured B+ B+ Copeinca ASA Foreign Currency Foreign Currency Long-Term IDR B+ Solid Market Position: Corporacion Pesquera Inca SAC’s (Copeinca) ratings reflect the company’s solid market position as the second-largest producer in the Peruvian fishmeal industry (granted a fishing quota of 10.7% in Peru’s north zone). The company benefits from the stable business and regulatory environment in Peru due to the implementation of the Individual Transferable Quota (ITQ) System. IDR – Issuer default rating. Rating Outlook Foreign Currency Long-Term Rating Stable Financial Data Copeinca (USD 000) Revenue Operating EBITDAR Operating EBITDAR/ Revenues (%) Operating EBITDAR/Fixed Charges (x) Cash Flow from Operations Free Cash Flow Total Debt Total Adjusted Debt/Operating EBITDAR (x) Total Adjusted Net Debt/Operating EBITDAR (x) 12/31/11 6/30/12 254.5 100.0 315.0 111.6 39.3 35.4 4.8 5.2 10.2 (23.80) 266.3 61.4 37.2 292.6 2.7 2.6 2.1 2.2 Limited Diversification: Copeinca has limited product, customer, and production diversification. Fishmeal and fish oil represents 100% of the company’s sales. China is the company’s main market, representing approximately 40%–50% of its total sales. Volatile Earnings and FCF: Inherent exposure to climatic events such as El Niño or ‘La Niña’ result in significant volatility in operating performance and FCF generation from year to year and can negatively affect the company’s credit profile. Shareholder Focus: Fitch believes that Copeinca’s financial strategy will continue to result in high dividend payments relative to its EBITDA and CFFO. This will limit FCF generation and will prevent a strengthening of Copeinca’s balance sheet. Expected Strong Performance and Stable Leverage: Following the recovery in the sector volumes during 2011, Copeinca’s revenue is expected to increase by about 10% to USD280 million. The company’s FCF is expected to be relatively unchanged in 2012, and the company should continue to maintain a total debt/EBITDA ratio in the 2.5x–3.0x range during 2012. Leverage stood at 2.6x on June 30, 2012. What Could Trigger a Rating Action Key Rating Drivers: Factors that could result in a negative rating action include deterioration in the company’s credit metrics, resulting from some combination of the following elements: adverse climatic conditions and/or declining fishmeal and fish oil prices resulting in increased financial leverage and a weak cash position. Factors that could trigger a positive rating action include significant reduction in leverage levels on a sustained basis, consistent positive free cash flow generation, and product diversification. Analysts Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Francisco Mercadal +5 62 499-3340 francisco.mercadal@fitchratings.com Latin America High Yield November 8, 2012 95 Corporates Recovery Worksheet The ‘B+/RR4’ rating of the company’s unsecured public debt reflects average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. Fitch uses soft caps on its recoveries in certain markets to reflect concern about creditor rights or weak enforcement of existing laws. This resulted in a cap of Copeinca’s debt at the level of ‘RR4’, which is consistent with anticipated recoveries in the range of 30% to 50%. Recovery Analysis — COPEINCA S.A. (USD Mil.) Going Concern Enterprise Value Liquidation Value June 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 112 70 33.5 5 167 Cash A/R Licenses Net PPE Total Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 21.6 — 15 36.6 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 391 39.1 352 Advance Rate (%) Available to Creditors 0 — 80 80 — — — 180 211.2 391.2 — — 225 264 489 352.1 117.4 234.7 11.7 222.9 Secured Priority Lien Value Recovered Recovery (%) Recovery Rating Notching Rating Secured 117 117.4 100 RR1 3 BB+ Unsecured Priority Lien Value Recovered Recovery (%) Concession Allocation (%) Recovery Rating Notching Rating Senior Unsecured Unsecured 175 0.2 175.0 0.2 100 100 100 100 RR1 RR1 3 3 BB+ BB+ Notes: 1) The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Concession payments allocated to subordinated debt should never result in higher recoveries than those of senior unsecured debt. 2) Numbers may not add due to rounding. Source: Fitch Ratings. Latin America High Yield November 8, 2012 96 Corporates Organizational Structure — Corporacion Pesquera Inca SAC (USD Mil.) Copeinca ASA (Norway) 100% Copeinca International SLU (Spain) 52.26% 43.38% Corporacion Pesquera Inca SAC USD175 Mil. Senior Unsecured Notes Due 2017 Total Debt EBITDA TD/EBITDA (x) 292.6 111.6 2.2 1.46% 4.36% 100% PFB Fisheries (Netherlands) Note: Corporacion Pesquera Inca SAC is the only operational company. All debt resides in it. Source: Copeinca. Latin America High Yield November 8, 2012 97 Corporates Debt and Covenant Synopsis COPEINCA (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Corporación Pesquera Inca S.A.C. (COPEINCA) Copeinca ASA Jan. 29, 2010 Feb. 1, 2017 Unsecured and Unsubordinated Debt USD175 Million Financial Covenants Consolidated Net Debt/EBITDA (Maximum) Less than 3.75x. Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Not later than 30 days following a Change of Control Triggering Event, COPEINCA or Copeinca ASA will make an Offer to Purchase all outstanding Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the Offer to Purchase Payment Date. COPEINCA or Copeinca ASA will not sell, convey, transfer, lease or otherwise dispose of all or substantially all of its and its Restricted Subsidiaries' properties and assets (computed on a consolidated basis) (as an entirety or substantially an entirety in one transaction or a series of related transactions), unless: (1) the buyer is a corporation in Peru, Norway, USA or EU and expressly assumes all obligations of Issuer under the Indenture; (2) immediately after the transaction no Event of Default will have accrued; (3) the buyer has a consolidated net worth equal or greater of the net worth of the issuer immediately prior to the transaction. Debt Restriction Additional Debt Restriction Limitation on Liens Limitation on Sale and Leaseback Transactions COPEINCA, Copeinca ASA, any Subsidiary Guarantor may Incur each and all of the following: (1) new indebtedness if it is expressly subordinated in right of payment to the Notes and Note Guarantees; (2) ranks at least parri pasu or below the Notes in case it is used to partially re-finance the Notes; (3) arises from hedging transactions; worker compensation claims, letters of credit or completion or performance guarantees and other financing of payables or receivables, or similar obligations in the ordinary course of business (4) is arising under agreements providing for indemnification, adjustment of purchase price or similar obligations; (5) is Permitted Subsidiary Indebtedness; (6) Guarantees of permitted indebtedness; (7) Indebtedness Incurred for inventory or receivables financing with Maturity not exceeding one year from the date of the sale of the Parent Guarantor and its Restricted Subsidiaries; and (8) Other Indebtedness in an aggregate principal amount not to exceed the greater of (a) US$50 million and (b) 7.5% of the total assets of the Parent Guarantor and its Restricted Subsidiaries. Copeinca ASA will not, and will not permit any of its Restricted Subsidiaries to directly or indirectly incur, assume or permit to exist any Lien of any nature whatsoever on any of its assets or properties of any kind, except Permitted Liens, unless the Notes or Parent Guarantee are equally and ratably secured by (or, if the obligation so secured is subordinated in right of payment to the Notes or the Note Guarantees, prior to) such Lien for so long as such Indebtedness is so secured. COPEINCA or Copeinca ASA will not, and will not permit any subsidiary to, enter into any sale and leaseback transaction with respect to any property unless COPEINCA or such Subsidiary would be entitled to: (i) incur debt in an amount equal to the attributable debt with respect to such sale and leaseback transaction; and (ii) create a lien on such property or asset securing such attributable debt without equally and ratably securing the notes. Other Limitation on Restricted Payments Copeinca ASA will not, and will not permit any Restricted Subsidiary to, directly or indirectly: (1) declare or pay any dividend or make any distribution on or with respect to the Copeinca ASA's or any of its Restricted Subsidiaries' Capital Stock other than dividends or distributions payable in shares of Copeinca ASA's or any of its Restricted Subsidiaries' Capital Stock (other than Disqualified Stock) or in options, warrants or other rights to acquire shares of such Capital Stock); (2) purchase, redeem, retire or otherwise acquire for value any shares of Capital Stock of Copeinca ASA or any Restricted Subsidiary (including options, warrants or other rights to acquire such shares of Capital Stock) held by any Persons other than Copeinca ASA, COPEINCA or any of its Restricted Subsidiaries; (3) make any voluntary or optional principal payment, or voluntary or optional redemption, repurchase, defeasance, or other acquisition or retirement for value, of Indebtedness that is expressly subordinated in right of payment to the Notes or any Note Guarantees (excluding any intercompany Indebtedness between or among the Copeinca ASA, COPEINCA and any of its Restricted Subsidiaries); or (4) make any Investment, other than a Permitted Investment. Dividends Restriction Limitation on Dividend The payment of annual dividends is permitted by Copeinca ASA, in an aggregate amount for any fiscal year equal to (1) 100% of Consolidated Net Income for such fiscal year if the Consolidated Leverage Ratio would be lower than 1.50 to 1.00, (2) 85% of Consolidated Net Income for such fiscal year if the Consolidated Leverage Ratio would be equal to or greater than 1.50 to 1.00, but lower than 2.00 to 1.00, (3) 75% of Consolidated Net Income for such fiscal year if the Consolidated Leverage Ratio would be equal to or greater than 2.00 to 1.00, but lower than 2.50 to 1.00, (4) 50% of Consolidated Net Income for such fiscal year if the Consolidated Leverage Ratio would be equal to or greater than 2.50 to 1.00, but lower than 3.75 to 1.00; in each case the Consolidated Leverage Ratio shall be calculated immediately prior to the payment of such dividend on a pro forma basis after giving effect to the payment of such dividend. N.A. – Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 98 Corporates Financial Summary Corporacion Pesquera Inca SAC (COPEINCA) (USD 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2008 2009 2010 2011 LTM Ended 6/30/12 75,671 75,671 30.34 30.34 14.65 31.85 (1.00) 59,540 59,540 28.25 28.25 5.58 9.36 (1.00) 75,704 75,704 32.49 32.49 12.93 (24) (2.00) 100,014 100,014 39.30 39.30 10.27 (10.00) 13.26 111,626 111,626 35.44 35.44 12.92 (1.00) 17.00 3.55 3.36 3.36 0.89 0.89 3.55 1.20 1.47 8.24 1.95 4.08 4.08 1.13 1.13 1.95 0.65 0.89 3.83 3.03 3.23 3.23 1.92 1.92 3.03 (1.00) 0.05 0.91 3.20 4.76 4.76 1.45 1.45 3.20 — 0.80 0.28 3.99 5.16 5.16 1.07 1.07 3.99 0.18 0.59 2.54 2.57 2.72 2.41 2.72 2.41 9.13 — 0.30 5.04 2.42 2.21 2.42 2.21 8.36 — 0.27 3.06 2.87 2.42 2.87 2.42 12.98 — 0.07 3.96 2.66 2.06 2.66 2.06 8.68 — 0.18 3.39 2.62 2.24 2.62 2.24 7.51 — 0.28 706,910 22,949 62,410 143,141 205,551 — 205,551 — 205,551 339,996 545,547 689,753 12,478 38,239 105,580 143,819 — 143,819 — 143,819 367,057 510,876 669,519 34,201 16,042 201,500 217,542 — 217,542 — 217,542 331,737 549,279 793,514 60,490 47,788 218,488 266,276 — 266,276 — 266,276 388,643 654,919 791,737 43,107 82,674 209,918 292,592 — 292,592 — 292,592 376,133 668,725 57,413 33,007 90,420 — (10,979) — 79,441 3,930 4,820 (82,509) — — 5,682 13,910 12,812 26,722 — (6,986) — 19,736 6,736 24,790 (61,733) — — (10,471) 47,576 9,804 57,380 — (63,027) (50,000) (55,647) 4,991 (91) 73,723 — (1,523) 21,453 46,267 (36,067) 10,200 — (36,700) —(26,500) — 2,700 50,100 — — 26,300 64,787 (3,387) 61,400 — (24,200) (40,000) (2,800) — —12,100 — — 9,300 249,425 93.25 49,336 22,522 — (3,450) 210,765 (16) 41,281 14,601 — (2,508) 233,042 10.57 59,723 23,457 — (6,493) 254,478 9.20 85,017 21,007 — 47,769 314,987 41.33 99,838 21,645 — 61,976 Source: Company reports. Latin America High Yield November 8, 2012 99 Corporates Cresud S.A.C.I.F. y A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Cresud S.A.C.I.F. y A. (USD Mil.) Revenue EBITDA Cash Flow from Operations (CFFO) Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/EBITDA (x) CFFO/Net Debt (x) 6/30/12 641.1 207.7 6/30/11 533.5 231.0 124.9 95.1 110.0 858.4 171.8 827.9 4.1 3.6 0.2 3.6 2.8 0.1 Leading Position in Real Estate and Agribusiness Sectors: Cresud S.A.C.I.F. y A. (Cresud) owns 64.2% of IRSA (‘BB’ local currency issuer default rating [IDR]), a leading real estate company in Argentina dedicated to real estate development, office rentals, and shopping mall operations through its subsidiary, Alto Palermo (APSA). As of June 30, 2012, Inversiones y Representaciones S.A. (IRSA) represented the total of Cresud’s consolidated EBITDA (due to negative results in the agribusiness segment), and 66% of consolidated assets. Additionally, Cresud has a growing presence in the agribusiness sector, acquiring farms with the intent to benefit from an appreciation of the land’s value over the medium to long term. Rating Linkage to IRSA Results in Structural Subordination of Credit Rating: Fitch Ratings links the ratings of Cresud and IRSA. This linkage reflects factors such as strong strategic and operational ties and the fact that IRSA’s upstream dividends represent a significant part of Cresud’s cash flow from operations. Cresud’s local currency IDR is notched down from IRSA’s rating because of the structural subordination of its debt and its weaker stand-alone financial profile. The dividend flow to Cresud from IRSA is expected to be relatively stable. During 2011, the company received dividends of USD14 million in June and USD31 million in November, while in June 2012 it received another USD14 million from IRSA. Foreign Currency IDR Constrained: Cresud’s foreign currency IDR is constrained at ‘B’ due to the ‘B’ country ceiling of Argentina, which also has a foreign currency credit rating of ‘B’. Country ceilings capture the risk of exchange controls being imposed that would prevent or materially impede the private sector’s ability to convert local currency into foreign currency and transfer the proceeds to nonresident creditors — transfer and convertibility (T&C) risk. Cyclical Cash Generation: Cresud’s ratings are constrained by above-average risks associated with operating in the real estate segment in Argentina. Due to weather conditions and commodity prices, the cash flow of its agribusiness division is also volatile. Cresud has an important portfolio of farms in Argentina and also has a presence in Bolivia, Paraguay, and in Brazil through its 39.64% stake in BrasilAgro. Strong Asset Portfolio and Moderate Leverage: Cresud’s leverage is moderate and its liquidity is manageable, as a result of unencumbered assets and land that could be sold. Regarding the real estate industry, the emphasis of Fitch’s methodology is on portfolio quality, diversity, and size. Cresud’s consolidated portfolio of real estate assets is strong with USD1.6 billion of undepreciated book capital as of June 30, 2012. The company’s leverage, measured by consolidated net debt as a percentage of undepreciated book capital of real estate assets, was 47%. This percentage would be even lower at market values. What Could Trigger a Rating Action Analysts Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: The Stable Outlook reflects Fitch’s expectation that Cresud will manage its balance sheet to a consolidated ratio of net debt-to-EBITDA of around 4.0x. Any significant increase in Cresud's leverage ratio would weaken credit quality and could result in a negative rating action. Cresud’s ratings would also be affected by an upgrade or downgrade of the Argentina’s country ceiling. 100 Corporates Recovery Rating The recovery ratings for Cresud’s capital markets debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery of between 30% and 50%. This recovery was capped at the ‘RR4’ level, which is the common recovery ceiling for debt issued in Argentina. Absent this cap, Fitch’s bespoke analysis indicates that the leverage of the company would lead to a recovery of approximately 65%. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 4.0x distressed EBITDA multiple, which is consistent with the value observed in the Buenos Aires’ stock exchange during the last year. Recovery Analysis Cresud S.A.C.I.F y A. (USD Mil.) Going Concern Enterprise Value June 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 208 25 156 4.0 623 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 92 — 50 142 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 623 62 561 Liquidation Value Cash A/R Inventory Net PPE Total Advance Rate 0 80 50 20 110.0 140.9 194.7 1,138.8 Available to Creditors — 113 97 228 438 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 561 — 561 28 533 Distribution of Value Secured Priority Senior Secured Secured Lien 0.0 0.0 Unsecured Priority Senior Unsecured Lien 858 Value Recovered — — Recovery (%) 0 0 Value Recovered Recovery (%) 561 65 Concession Allocation (%) 100 Recovery Rating — — Notching — — Rating — — Recovery Ratinga RR4 Notching — Rating B a Cresud’s recovery rating is capped at the level of ‘RR4’ due to concerns about the low probability of high recoveries for bondholders of corporates domiciled in Argentina. The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Source: Fitch Ratings. Latin America High Yield November 8, 2012 101 Corporates Organizational Structure — Cresud S.A.C.I.F. y A. FYE June 2012 Summary Statistics Cresud S.A.C.F. y A. USD208 Million of EBITDA USD110 Million of Cash and Marketable Securities USD858 Million of Total Debt 64.20% IRSA S.A. 39.64% Brasil Agro USD60 Million Notes Due 2014 65.85% FyO COM Cactus Argentina AgroUranga 100.00% Helmir S.A. 100% 95.12% Agrotech Agropecuaria A cres del Sud Pluriagro Ombu Agropecuaria Northagro Yatay Agropecuaria 46.84% Agro Managers 100% 96.37% FyO Trading 35.72% 100.00% 2.2% Exportaciones Agroindustriales Argentinas (EAASA) Yutan Agropecuaria Source: Fitch and Cresud S.A.C.I.F. y A.’s public information. Latin America High Yield November 8, 2012 4.48% 102 Corporates Debt and Covenant Synopsis Cresud S.A.C.I.F. y A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Other Transactions with Affiliates Limitation on Secured Debt Cresud S.A.C.I.F. y A. N.A. Aug. 29, 2011 Sept. 7, 2014 Senior Unsecured Notes N.A. N.A. Change of control clause at 100% of principal. If the issuer at any time ceases to beneficially own, directly or indirectly, at least 45% of the voting power of the Voting Stock of IRSA or ceases to have the right to appoint at least the majority of the members of the board of directors of IRSA, then, each holder will have the right to require that the issuer purchase all of the holder’s notes at a purchase price equal to 100% of the principal amount. The issuer may only incur additional indebtedness if, and immediately after giving pro forma effect to the incurrence, the ratio of (i) the amount of the issuer's unconsolidated short-term indebtedness, to (ii) its total assets, as specified in the issuer’s most recently available basic quarterly financial statements prior to the date of such incurrence, is lower than 0.35x. Transactions with affiliates are permitted as long as: 1) the terms of the transaction are not substantially less favorable than those that could be achieved with a nonrelated party; 2) the terms of such transactions are in compliance with the applicable laws, regulations, and pronouncements. Restrictions on merger or consolidation of issuer. Exceptions include the merger of other entities with the issuer provided that surviving entity will be the issuer. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 103 Corporates Financial Summary — Cresud S.A.C.I.F. y A. (ARS 000, Fiscal Year Ended June) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2012 2011 2010 2008 2007 763,736 45.9 9.3 (7.4) 5.4 2009 330,659 26.4 8.7 (4.1) 5.0 893,336 32.4 10.8 5.9 1.8 924,147 43.3 11.0 1.0 5.2 40,977 28.2 (0.6) (74.4) 1.8 38,817 40.0 2.3 (77.1) 6.8 2.2 2.3 0.6 2.2 0.4 0.7 2.2 3.0 3.2 0.6 3.0 0.2 0.6 2.2 2.8 4.2 0.6 2.8 0.0 0.3 0.9 3.2 2.6 0.5 3.2 0.1 0.4 1.0 (0.5) 1.8 0.2 (0.5) (0.4) 2.0 (4.1) 1.7 3.1 0.3 1.7 (0.5) 0.2 (2.6) 4.5 4.3 3.8 10.9 — 0.3 3.9 3.7 2.9 10.9 — 0.4 3.7 2.5 2.1 11.0 — 0.6 3.5 4.2 3.6 16.0 — 0.4 (16.3) 4.7 (8.0) 13.7 — 1.0 6.3 3.6 1.4 8.1 — 0.8 9,755,212 497,498 1,095,235 2,787,945 3,883,180 — 3,883,180 0 3,883,180 4,054,059 7,937,239 9,733,418 706,021 1,316,232 2,086,305 3,402,537 — 3,402,537 0 3,402,537 4,559,985 7,962,522 6,837,888 296,797 1,059,736 853,166 1,912,902 — 1,912,902 0 1,912,902 3,593,201 5,506,103 5,976,056 211,676 536,888 866,700 1,403,588 — 1,403,588 0 1,403,588 3,248,866 4,652,454 2,057,714 521,107 193,106 — 193,106 — 193,106 0 193,106 1,762,338 1,955,444 1,065,302 84,925 122,749 24,744 147,493 8,668 138,825 0 147,493 824,953 972,446 460,153 77,034 537,187 0 (241,683) (134,129) 161,375 (369,683) (133,031) 107,005 74,079 4,542 (155,713) 587,065 (206,469) 380,596 0 (169,634) (190,406) 20,556 (703,121) 67,127 1,144,521 808 0 529,891 329,234 (155,139) 174,095 0 (199,674) (97,262) (122,841) (320,548) (9,703) 397,706 19,363 0 (36,023) 278,410 21,126 299,536 0 (308,328) (43,065) (51,857) (71,338) 12,487 (150,779) (47,960) 37 (309,410) (35,175) (44,995) (80,170) 0 (19,597) (8,250) (108,017) (313,235) (65,883) 31,017 881,117 11,455 436,454 9,394 (59,354) (49,960) 0 (19,393) (5,500) (74,853) (727) 13,007 39,369 0 81,945 58,741 2,757,419 29.2 654,489 396,221 0 78,263 2,133,827 28.2 729,629 290,854 0 212,565 1,664,634 32.7 581,158 181,806 0 185,406 1,254,663 671.7 210,720 128,270 0 124,616 145,267 49.6 35,760 23,339 0 22,948 97,093 (2.9) 34,792 12,699 0 49,362 Note: Cresud has consolidated with IRSA's figures since October 2008. Source: Company’s financial statements and Fitch Ratings. Latin America High Yield November 8, 2012 104 Corporates Financial Summary — Cresud S.A.C.I.F. y A. Period-End Exchange Rate Average Exchange Rate 4.5238 4.3012 4.1100 3.9998 3.9317 3.8458 3.7925 3.4096 3.0235 3.1247 3.0905 3.0861 2012 2011 2010 2009 2008 2007 207,695 32.4 10.8 5.9 1.8 231,048 43.3 11.0 1.0 5.3 198,590 45.9 9.3 (7.4) 5.4 96,979 26.4 8.7 (4.1) 5.1 13,053 28.2 (0.6) (74.4) 1.7 12,578 40.0 2.3 (77.1) 6.8 2.2 2.3 0.6 2.2 0.4 0.7 2.2 3.0 3.2 0.6 3.0 0.2 0.6 2.2 2.8 4.2 0.6 2.8 0.0 0.3 0.9 3.2 2.6 0.5 3.2 0.1 0.4 1.0 (0.5) 1.8 0.2 (0.5) (0.4) 2.0 (4.1) 1.7 3.1 0.3 1.7 (0.5) 0.2 (2.6) 4.3 4.1 3.6 10.9 — 0.3 3.8 3.6 2.8 11.1 — 0.4 3.7 2.4 2.1 11.0 — 0.6 3.1 3.8 3.2 17.3 — 0.4 (16.9) 4.9 (8.3) 13.3 — 1.0 6.7 3.8 1.6 8.1 — 0.8 2,156,420 109,973 242,105 616,284 858,389 — 858,389 0 858,389 896,162 1,754,551 2,368,228 171,781 320,251 507,617 827,868 — 827,868 0 827,868 1,109,485 1,937,353 1,739,168 75,488 269,536 216,997 486,533 — 486,533 0 486,533 913,905 1,400,438 1,575,756 55,814 141,566 228,530 370,096 — 370,096 0 370,096 856,656 1,226,752 680,348 172,295 63,847 — 63,847 — 63,847 0 63,847 582,687 646,534 344,702 27,479 39,718 8,006 47,724 — 47,724 0 47,724 266,932 314,656 106,982 17,910 124,892 0 (56,190) (31,184) 37,519 (85,949) (30,929) 24,878 17,223 1,056 (36,202) 146,774 (51,620) 95,154 0 (42,411) (47,604) 5,139 (175,789) 16,783 286,145 202 0 132,479 85,609 (40,340) 45,269 0 (51,920) (25,290) (31,942) (83,350) (2,523) 103,413 5,035 0 (9,367) 81,655 6,196 87,851 0 (90,429) (12,631) (15,209) (20,923) 3,662 (44,222) (14,066) 11 (90,747) (11,205) (14,333) (25,538) 0 (6,242) (2,628) (34,408) (99,779) (20,987) 9,880 280,673 3,649 139,029 3,044 (19,233) (16,189) 0 (6,284) (1,782) (24,255) (236) 4,215 12,757 0 26,553 19,034 641,081 20.2 152,164 533,483 23.3 182,416 432,845 17.6 151,115 367,980 607.2 61,802 46,274 47.1 11,391 31,461 (5.6) 11,274 92,119 72,717 47,274 37,620 7,434 4,115 0 0 0 0 0 0 18,196 53,144 48,210 36,549 7,310 15,995 (USD 000, Fiscal Year Ended June 30) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income Cresud has consolidated with IRSA's figures since October 2008. Source: Fitch Ratings. Latin America High Yield November 8, 2012 105 Corporates Digicel Group Limited And Subsidiaries Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR B Local Currency Long-Term IDR Secured (DIFL) Senior Unsecured (DL) Subordinated (DGL) B B+/RR3 B/RR4 B–/RR5 IDR – Issuer default rating. DIFL – Digicel International Finance Ltd. DL – Digicel Ltd. DGL – Digicel Group Ltd. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Digicel Group Limited (USD 000) Revenue Operating EBITDAR Operating EBITDAR/ Revenues (%) Cash Flow from Operations Free Cash Flow Operating EBITDAR/Fixed Charges (x) Total Adjusted Debt with Equity Credit/Operating EBITDAR (x) 6/30/12 3/31/12 2,481,860 2,408,679 1,097,533 1,070,825 44.2 44.5 478,778 (260,567) 505,244 82,620 2.4 2.3 4.7 4.8 High Leverage but Solid Operations: Digicel Group Limited’s (DGL) ratings are supported by its position as the leading provider of wireless services in most of its markets in the Caribbean and its strong operating track record. The ratings are constrained by high leverage and the company’s exposure to low-rated countries, as about 40% of its cash flow is generated in Jamaica and Haiti. Acquisitions Improving Competitive Position: The recent acquisitions of Voila in Haiti and the transaction with America Movil, where the El Salvador division is pending regulatory approval, will strengthen the company’s competitive position in its top markets, Jamaica and Haiti. In addition, the company has a minority stake in M-Via (rebranded to Boom Financial), a 51% stake in Nextar, and a 100% ownership stake in Data Nets, based in Papua New Guinea (PNG). Jamaica’s New Regulation and Taxes Manageable: Leverage is not expected to materially change considering the effect on EBITDA of new regulation and taxes in Jamaica. This effect is expected to be offset by continued growth from Haiti and PNG. Broadband Strategy: Digicel is pursuing service offerings using Wimax, HSPA+, or 4G networks for delivering broadband services in the markets where the company participates. These investments will take advantage of the low fixed-line penetration rates. These initiatives underpin revenue from value-added services as they accounted for 20% of revenues in the quarter ended June 30, 2012. Lower Capex: The capex-to-revenue ratio approached 17.5% during fiscal 2012 and is expected to trend towards 10% in the next few years. The decline in the capex ratio should have a positive effect on free cash flow amid a stable dividend policy of USD40 million per year. DGL paid a USD300 million special dividend during the first quarter of fiscal 2013. Parent Subsidiary Rating Linkage: Under Fitch’s approach to rating entities within a corporate group structure, the issuer default ratings (IDRs) of DGL, Digicel Limited (DL), and Digicel International Finance Limited (DIFL) are the same. The degree of linkage between the parent company and its subsidiaries is considered strong. Recovery Prospects: For issue ratings, Fitch rates debt at DIFL one notch higher than DL, reflecting its above-average recovery prospects. DL’s ratings reflect the increased burden the DGL subordinated notes place on the operating assets and the loss of financial flexibility. The ratings of DGL incorporate their subordination to debt at DIFL and DL, as well as the subordinated notes’ below-average recovery prospects in the event of default. Analysts Sergio Rodriguez, CFA +52 81 8399-9100 sergio.rodriguez@fitchratings.com John C. Culver, CFA +1 312 368-3216 john.culver@fitchratings.com Latin America High Yield November 8, 2012 What Could Trigger a Rating Action Increased Leverage/Refinancing Risk: A negative rating action could be triggered if consolidated leverage at DGL approaches 6.0x. The inability to refinance sizeable bullet maturities in advance — especially those due in 2014 or 2015 — could also lead to a rating action. Short-term upside potential is limited. Positive factors for credit quality would be a sustained reduction in leverage at DGL to about 4.0x or below and an increase in free cash flow generation. 106 Corporates Digicel Group Limited — Corporate Structure (USD Mil.) Digicel Group Limited (Bermuda) 43.4% Digicel Holdings Central America Limited Unconsolidated Debt 190 Consolidated Debt 4,874 EBITDA 1,070 Consolidated D/E = 4.6x 100% 100% Digicel Limited (Bermuda) Unconsolidated Debt 1,560 Consolidated Debt 2,472 EBITDA 860 D/E = 2.9x 100% Digicel Pacific Limited Debt 211 EBITDA 210 D/E = 1.0x Digicel Holdings (Bermuda) Ltd (Bermuda) 100% Digicel International Finance Limited (St. Lucia) Debt 912 EBITDA 860 D/E = 1.1x Operating Companies Debt 0 EBITDA 860 D/E = N.A. Note: Data for the last 12 months ended June 30, 2012. N.A. – Not applicable. D/E – Debt/EBITDA. Source: Digicel audited and internal financial statements, Fitch. Capitalization — Digicel Group Limited (Capitalization as of June 30, 2012; USD Mil.) DGL Sr. Unsecured Notes due 2015 including Toggle Notes DGL Sr. Unsecured Notes due 2018 DPL Debt DL Sr. Unsecured Notes due 2014 DL Sr. Unsecured Notes due 2017 DL Sr. Unsecured Notes due 2020 DIFL Secured Credit Facility Total Debt w/Equity Credit Minority Interest Majority Shareholders’ Equity Total Shareholders’ Adjusted Equity Total Capitalization Debt to LTM EBITDA (x) Debt to L2QA EBITDA (x) Ratings B–/RR5 B–/RR5 N.R. B/RR4 B/RR4 B/RR4 B+/RR3 Amount 1,415 775 212 510 800 250 912 4,874 19 (1,497) (1,479) 3,395 4.6 4.3 (%) 41.7 22.8 6.2 15.0 23.6 7.4 26.9 143.5 0.6 (44.1) (43.5) 100.0 Fiscal Year Scheduled Debt Maturities 2013 2014 2015 2016 2017 2018 2019 2020 Total 105 613 1,773 295 263 1,575 — 250 4,874 Liquidity Cash and Cash Equivalents 343 L2QA EBITDA – Last two quarters’ EBITDA annualized. LTM – Last 12 months. N.R. – Not rated. RR – Recovery rating. Source: Fitch. Latin America High Yield November 8, 2012 107 Corporates Recovery Analysis Digicel Group Limited (USD Mil.) IDR: B Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Issuer Default Rating First Priority Secured Senior Unsecured Senior Subordinated Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 1,070.3 35.0 696 5.0 3,478.4 — — — Advance Available to Rate (%) Creditors 100 342.8 75 357.7 50 18.7 50 929.0 1,648.2 342.8 476.9 37.4 1,858.0 2,715.1 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 3,478.4 347.8 3,130.6 — — — — — Lien — 1,136.0 1,560.0 2,190.0 Value Recovered — 1,136.0 1,560.0 434.6 Recovery (%) — 100 100 20 Recovery Rating — RR3 RR4 RR5 Notching — +1 0 (1) Rating B B+a Bb B– a Limited to one notch due to soft cap methodology. bNo notch benefit due to soft cap methodology. PPE – Property, plant, and equipment. Source: Fitch. Latin America High Yield November 8, 2012 108 Corporates Debt and Covenant Synopsis — Digicel Group Limited Debt Class Digicel International Finance Ltd. (DIFL) New Extended Facility Digicel Limited (DL) 2014 Senior Notes Security Financial Covenants First priority lien on all assets. Total Debt/EBITDA < 4.0x Sr. Secured debt/EBITDA < 2.25x EBITDA/Interest Expense > Restrictions on investments, debt liens, acquisitions, and 3.0x restricted payments. Senior unsecured guaranteed on a senior subordinated basis by certain wholly owned Digicel Total Debt/EBITDA < 3.25x Sr. Secured subsidiaries. debt/EBITDA < 1.75x Other The indenture governing the 2014 notes, among other things, restricts DL’s ability and the ability of certain of its subsidiaries to incur additional indebtedness and issue preferred stock, pay dividends, make investments or certain other restricted payments, create liens, engage in sale-leaseback transactions, guarantee debt, and engage in mergers, consolidations, and certain sales or leases of our properties and assets. The notes also have a changeof-control clause at 101% of the principal and the same optional redemption for up to 35% of the aggregate principal at a redemption price of 112 from April 1, 2012. DL 2017 Senior Notes Senior unsecured guaranteed on a senior subordinated basis by certain wholly owned Digicel Total Debt/EBITDA < 4.0x Sr. Secured subsidiaries. debt/EBITDA < 2.25x DL 2020 Senior Notes Senior unsecured guaranteed on a senior subordinated basis by certain wholly owned Digicel Total Debt/EBITDA < 3.25x Sr. Secured subsidiaries. debt/EBITDA < 1.75x The indenture governing the 2017 notes, among other things, restricts DL’s ability and the ability of certain of its subsidiaries to incur additional indebtedness and issue preferred stock, pay dividends, make investments or certain other restricted payments, create liens, engage in sale-leaseback transactions, guarantee debt, and engage in mergers, consolidations, and certain sales or leases of our properties and assets. The indenture governing the 2014 notes, among other things, restricts DL’s ability and the ability of certain of its subsidiaries to incur additional indebtedness and issue preferred stock, pay dividends, make investments or certain other restricted payments, create liens, engage in sale-leaseback transactions, guarantee debt, and engage in mergers, consolidations, and certain sales or leases of our properties and assets. The notes also have a changeof-control clause at 101% of the principal and the same optional redemption for up to 35% of the aggregate principal at a redemption price of 112 from April 1, 2012. Digicel Pacific Finance Limited (DPFL) Facility All shares and assets of DPFL and restricted subsidiaries of Samoa, Total Debt/EBITDA < 2.71x by March 2012 Tonga, Vanuatu and Fiji. EBITDA/Interest Expense > 4.25x Customary project finance covenants and a USD28 million contingent equity commitment. All shares and assets of Digicel Digicel Papua New Guinea (PNG) PNG. Total Debt/EBITDA < 2.0x by March 2012 EBITDA/Interest Expense > 4.0x DGL 2015 Senior Notes & Toggle Notes Total Debt/EBITDA < 6.0x Total Debt/EBITDA of restricted subsidiaries < 4.5x Customary project finance covenants and a USD30 million contingent equity commitment. Certain covenants limit the company’s ability to incur additional indebtedness, pay dividends or other distributions with respect to capital stock, provide guarantees, or consolidate, merge, or transfer substantially all assets. The notes also have a change-ofcontrol clause at 101% of the principal and the same optional redemption for up to 35% of the aggregate principal at a redemption price of 108.875 for the senior notes and 108.125 for the toggle notes starting in 2010 and stepping down to 104.438%/104.563% (cash/toggle) on Jan. 15, 2012. Total Debt/EBITDA < 6.0x Certain covenants limit the company’s ability to incur additional indebtedness, pay dividends or other distributions with respect to capital stock, provide guarantees, or consolidate, merge, or transfer substantially all assets. The notes also have a change-ofcontrol clause at 101% of the principal and an optional redemption for up to 35% of the aggregate principal at 110.5% of par value prior to April 15, 2013. On and after April 15, 2014 the notes are redeemable at 105.25% of par value declining at a rate of 1.75% per year until 2017. DGL 2018 Senior Notes Senior unsecured and structurally subordinated. Senior unsecured and structurally subordinated. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents, including bond indentures. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company, Fitch. Latin America High Yield November 8, 2012 109 Corporates Financial Summary Digicel Group Limited (USD Mil., Year Ended June 30) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financial) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2012 2011 2010 2009 1,070,281 1,097,533 43.1 44.2 0.28 (10.5) 1.1 1,041,572 1,070,825 43.2 44.5 0.25 3.4 (4.1) 918,725 938,258 43.9 44.8 0.24 6.4 (3.7) 752,506 773,741 43.1 44.3 0.26 15.5 12.2 752,506 773,741 43.1 44.3 0.26 15.5 12.2 2.4 2.7 2.6 1.7 1.7 2.4 0.2 0.8 1.1 2.4 2.6 2.5 1.7 1.7 2.3 0.8 1.9 1.2 2.2 2.4 2.4 1.2 1.2 2.2 0.7 1.5 1.5 2.6 2.8 2.7 1.7 1.7 2.5 1.2 3.7 2.7 2.6 2.8 2.7 1.7 1.7 2.5 1.2 3.7 2.7 5.1 4.6 4.2 4.7 4.3 8.5 — 0.0 5.2 4.7 4.1 4.8 4.2 8.4 — 0.0 5.5 4.9 4.3 5.0 4.3 9.0 — 0.1 5.5 5.0 3.7 5.1 3.8 7.6 — 0.0 5.5 5.0 3.7 5.1 3.8 7.6 — 0.0 4,370,699 342,792 227,536 4,659,290 4,886,826 — 4,886,826 218,016 5,104,842 (1,478,954) 3,625,888 4,662,259 656,604 210,548 4,673,624 4,884,172 — 4,884,172 234,024 5,118,196 (1,162,797) 3,955,399 4,219,283 613,335 387,528 4,140,669 4,528,197 — 4,528,197 156,264 4,684,461 (1,153,591) 3,530,870 3,188,219 1,040,848 166,050 3,626,948 3,792,998 — 3,792,998 169,880 3,962,878 (1,173,058) 2,789,820 3,188,219 1,040,848 166,050 3,626,948 3,792,998 — 3,792,998 169,880 3,962,878 (1,173,058) 2,789,820 575,640 (96,862) 478,778 0 (428,469) (425,876) (260,567) (376,710) 138,765 214,873 0 (6,627) (405,266) 552,863 (47,619) 505,244 0 (421,748) (115,876) 82,620 (362,733) 114,638 320,861 0 2,883 43,269 456,536 (24,804) 431,732 0 (294,585) (45,322) 133,918 (766,647) (109,119) 367,478 0 (11,050) (427,513) 431,142 4,042 435,184 0 (159,592) (44,728) 270,854 (273,716) 23,250 585,426 500 (16,048) 550,276 431,142 4,042 435,184 0 (159,592) (44,728) 270,854 (273,716) 23,250 585,426 500 (16,048) 550,276 2,481,860 14.1 611,780 398,552 27,252 (13,685) 2,408,679 15.1 616,021 394,397 29,253 47,233 2,092,869 19.8 558,838 375,040 19,533 43,158 1,747,415 0.9 464,693 264,890 21,235 (131,679) 1,747,415 0.9 464,693 264,890 21,235 (131,679) Source: Fitch. Latin America High Yield November 8, 2012 110 Corporates Empresa Generadora de Electricidad Haina, S.A. (Haina) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term FC IDR Long-Term LC IDR Senior Unsecured High Risk Sector: The Dominican Republic power sector is characterized by low collections from end users and high electricity losses. Such conditions have undermined distribution companies’ (DISCOs) cash flow generation, leaving them dependent on government subsidies to honor their accounts payable to the Dominican generation companies. This links the credit quality of the distribution and generation companies in the country to that of the sovereign. B B B FC – Foreign currency. LC – Local currency. IDR – Issuer default rating. Rating Outlook Long-Term LC/FC IDR Positive Financial Data Haina S.A. (USD Mil.) Revenue LTM 3/31/12 12/31/11 648 618 EBITDA EBITDA Margin (%) 119 18.4 112 18.2 FFO CFFO FCF FFO Interest Coverage (x) Total Debt Total Debt/ EBITDA (x) EBITDA/Debt Service Coverage (x) 99 82 (24) 83 41 (10) 5.5 301 5.4 281 2.5 2.5 1.7 1.7 Transition Risk Diminishes: The incumbent party’s electoral victory in the presidential elections held during May 2012 partially diminishes the political uncertainty that had prevailed during the first half of the year. For Empresa Generadora de Electricidad Haina, S.A. (Haina), the results lowered the risk of noncontinuous policies aimed at strengthening the financial viability of the Dominican electricity sector, as agreed to under the last IMF Standby agreement, which expired in February 2012. Key political measures needed to achieve a financially viable sector in the medium term include a gradual adjustment to tariffs, increases in the DISCOs’ cash recovery index (CRI) to 70% from the historical lows of 50%, and the reduction of days receivables from generating companies to a 60-day average. Competitive Generation Assets: Haina’s ratings are supported by its diversified portfolio of generation assets, including wind generation, the use of various sources of fuel in its plants, and its strong market position and operational efficiency. These plants use fuel oil, diesel, and coal. This diversification provides the company with different positions on the dispatch merit list. Haina’s operational efficiency compares favorably with other generating companies in the country, registering an average heat rate of 9.526 British thermal units (Btu) per kilowatt-hour (kWh). Its most efficient unit registers a 7.800 Btu/kWh heat rate burning heavy fuel oil, also known as fuel oil No. 6. Strong Credit Metrics: Haina’s credit metrics are strong relative to other ‘B’ rated companies. For the LTM ended March 31, 2012, the company reported an EBITDA of USD119 million (USD112 million in fiscal 2011) and had an 18.4% EBITDA margin. Respectively, leverage and debt service coverage stood at 2.5x and 1.7x in relation to EBITDA as of March 31, 2012. Volatile Cash Flow Generation and Collection: For the LTM ended March 31, 2012, the company generated USD82 million of CFFO, an increase from USD41 million in 2011. Like other generators, the company struggles to collect receivables from distribution companies. At the end of first-quarter 2012, days receivable outstanding totaled 120 days, which is equivalent to four invoice periods. The collection rate was 54% during this period. With USD149 million of cash on hand, liquidity is high at 3x short-term debt. Analysts Julio Ugueto +58 212 286-3356 julio.ugueto@fitchratings.com Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Latin America High Yield November 8, 2012 What Could Trigger a Rating Action Key Rating Drivers: Lower dependence of the sector on government subsidies could lead to a rating upgrade. The ratings would also be positively affected by a positive rating action on the sovereign. 111 Corporates Recovery Analysis Haina’s issuance has been assigned a recovery rating of ‘RR4’. The recovery was based upon the treatment of Haina as a going concern since a liquidation scenario is considered highly unlikely. The ratings have been capped at ‘RR4’ due to concerns about the low probability of high recoveries for bondholders of corporates domiciled in the Dominican Republic. Haina’s debt issuance is not guaranteed by any specific asset but rather by all of the company’s assets with no subordination with respect to any instrument. Fitch currently maintains a positive outlook for the sovereign, and as such we do not foresee a bankruptcy scenario for Haina in the near future, unless a low probability event such as a severe fiscal crisis materializes that would severely impact the company’s cash flow. The distressed EBITDA of Haina was calculated to cover the company’s fixed charges and critical maintenance capex. This EBITDA was multiplied by a conservative 5x multiple to arrive at a distressed company valuation. This distressed valuation would be associated with a severe fiscal crisis that would lead to a sustained cash flow drain for all generating companies in the country and contemplates the low probability event of a nonfriendly renegotiation scenario of the company’s PPA’s with distribution companies to the detriment of Haina. In this hypothetical scenario, it would be reasonable to expect a low demand for the company’s assets under a competitive bidding process, further supporting the distressed valuation commented above. Recovery Analysis Empresa Generadora de Electricidad Haina, S.A. (USD Mil.) IDR: B Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Distressed EBITDA Market Multiple (x) Enterprise Value 119.0 63.0 44.0 5.0 220.0 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Principal Amortization (Next 12 Months) Unsecured Priority Issuer Default Rating Senior Unsecured Subordinated Junior Subordinated Amount Outstanding and Available R/C — 227.0 — — 22 — 10 12 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Value Recovered — 198.0 — — Recovery Rate (%) — 87 — — Recovery Rating — RR2 — — Notching — +2 — — 220.0 22.0 198.0 Rating B BB– — — Source: Fitch. Latin America High Yield November 8, 2012 112 Corporates Organizational Structure – Empresa Generadora de Electricidad Haina S.A. Basic Energy Caribe Energy Ltd. 31.08% Other 24.41% 44.51% Dominican Republic (IDR — B) Haina Investment Company Ltd. Through FONPER 50.00% 50.00% Empresa Generadora de electricidad Haina S.A. Operating Company (Guarantor) IDR — B EGE Haina Finance Company (Issuer) USD175 Mil. Senior Unsecured Notes Rating — B Source: Empresa Generadora de Electricidad Haina S.A. Latin America High Yield November 8, 2012 113 Corporates Debt and Covenant Synopsis — Empresa Generadora de Electricidad Haina, S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt EGE Haina Finance Company Empresa Generadora de Electricidad Haina, S.A. May 11, 2007 April 26, 2017 Senior Unsecured Notes Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) (x) Interest Coverage (Minimum) (x) 3.5 2.5 Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Restriction on Purchase of Notes Change-of-control clause at 101% of principal. Generally permits asset sales as long as it is divested at least equal to fair market value, Haina receives at least a 75% cash payment, and the proceeds are used to reduce debt or are reinvested. The issuer is not allowed to incur additional debt. The guarantor is not allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. The guarantor can incur additional indebtedness in an aggregate principal amount not to exceed $25 million. Haina is not permitted to issue senior secured debt or to create any lien on any asset, property, or income without providing the same security to the existing notes. The issuer is not permitted to pay any dividends or make any other distribution to its shareholders. The guarantor is not permitted to make any restricted payments if, among other clauses, it cannot incur additional debt according to its limitation on indebtedness, an event of default has occurred, or if such payment exceed 100% of combined net income. If the issuer, guarantor, or any restricted subsidiary defaults on any indebtedness of at least USD20 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Events of default include, but are not limited to, the interest reserve not being fully funded for more than five days and if the issuer, guarantor or any restricted subsidiary defaults in any indebtedness of at least USD20 million. The issuer is allowed to redeem the notes in whole or in part at a preset redemption price. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 114 Corporates Financial Summary Empresa Generadora de Electricidad Haina, S.A. (USD Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 118,846 118,846 18.4 18.4 17.4 (3.7) 18.3 112,243 112,243 18.2 18.2 15.6 (1.7) 18.7 78,649 78,649 18.6 18.6 16.0 12.5 13.6 44,555 44,555 14.5 14.5 9.1 (14.1) 4.7 74,174 74,174 16.1 16.1 18.0 (6.7) 12.6 5.5 5.4 5.4 1.7 1.7 5.5 0.0 2.1 0.9 5.4 5.9 5.9 1.7 1.7 5.4 0.1 2.9 1.1 4.2 3.9 3.9 2.0 2.0 4.2 1.8 4.6 2.7 1.7 1.7 1.7 1.4 1.4 1.7 (0.5) 0.7 (2.9) 3.7 3.1 3.1 2.9 2.9 3.7 (0.3) 0.6 0.4 2.5 2.5 1.3 2.5 1.3 8.6 — 0.2 2.8 2.5 0.9 2.5 0.9 7.8 — 0.2 2.4 2.6 1.2 2.6 1.2 9.9 — 0.09 4.5 4.5 3.7 4.5 3.7 13.6 — 0.03 2.0 2.4 2.1 2.4 2.1 13.1 — 0.01 824,452 149,333 47,700 253,311 301,011 — 301,011 0 301,011 394,305 695,316 741,466 183,879 47,656 233,750 281,406 — 281,406 0 281,406 375,160 656,566 583,385 110,924 19,600 186,967 206,567 — 206,567 0 206,567 324,181 530,748 554,309 39,548 6,000 196,367 202,367 — 202,367 0 202,367 291,804 494,171 584,234 22,340 1,703 175,000 176,703 — 176,703 0 176,703 316,687 493,390 99,035 (16,588) 82,447 0 (92,450) (13,999) (24,002) 14 15,649 90,243 0 (5,579) 76,325 83,227 (42,154) 41,073 0 (37,539) (13,999) (10,465) 60 9,035 74,840 0 (514) 72,956 64,707 35,110 99,817 0 (37,099) (9,997) 52,721 0 14,488 4,200 0 (30) 71,379 19,021 (36,323) (17,302) 0 (5,881) (20,003) (43,186) 0 32,978 27,737 0 (322) 17,207 65,116 (58,979) 6,137 0 (17,098) (20,000) (30,961) 0 16,986 (10,738) 0 0 (24,713) 647,558 4.9 101,435 22,026 0 67,458 617,540 46.2 95,895 18,922 0 65,470 422,509 37.5 62,567 20,304 0 41,975 307,198 (33.3) 29,015 25,837 0 14,403 460,567 0.3 58,870 23,792 0 38,934 Source: Fitch. Latin America High Yield November 8, 2012 115 Corporates Empresa Generadora de Electricidad Itabo, S.A. (Itabo) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term FC IDR Long-Term LC IDR Senior Unsecured B B B FC – Foreign currency. LC – Local currency. IDR – Issuer default rating. Rating Outlook Long-Term LC/FC IDR Positive Financial Data Itabo S.A. (USD Mil.) Total Assets Total Equity Net Income EBITDA Total Debt LTM 3/31/12 580 337 (3) 39 129 12/31/11 570 328 (6) 27 129 High Risk Sector: The Dominican Republic power sector is characterized by low collections from end users and high electricity losses. Such conditions have undermined distribution companies’ (DISCOs) cash flow generation, leaving them dependent on government subsidies to honor their accounts payable to the Dominican generation companies. This links the credit quality of the distribution and generation companies in the country to that of the sovereign and has resulted in historically high levels of volatility in cash flows for the generators. Transition Risk in 2012: The incumbent party’s electoral victory in the presidential elections held during May 2012 partially diminishes the political uncertainty that had prevailed during the first half of the year. For Empresa Generadora de Electricidad Itabo, S.A., the results lowered the risk that the new government would discontinue policies aimed at strengthening the financial viability of the Dominican electricity sector, as agreed to under the last IMF Standby agreement, which expired in February 2012. Key political measures needed to achieve a financially viable sector in the medium term include a gradual adjustment to tariffs, increases in the DISCOs’ cash recovery index (CRI) to 70% from the historical lows of 50% in order to reduce their dependence on government funding to pay for their electricity bill, and the reduction of days receivables from generating companies to a 60-day average. Well-Structured PPAs Support the Ratings: Itabo’s ratings are supported by its strong competitive position as one of the lower cost thermoelectric generators in the country. The company operates two low-cost coal-fired thermal generating units and sells electricity to three distribution companies in the country through well-structured, long-term, U.S. dollardenominated power purchase agreements (PPAs). Financial Profile Evolution: The company’s financial profile improved slightly during the first quarter of 2012. This improvement occurred following the optimization of its coal cash cost, in a context of rising electricity prices and moderate demand growth. These factors allowed the company to register an EBITDA of USD39 million for the LTM ended March 31, 2012. This compares with USD27 million in 2011. Leverage was 3.3x as of March 31, 2011, which is relatively low for the category. Analysts Volatile Cash Flow Generation: Itabo’s cash flow from operations (CFFO) was USD16 million during the LTM. This is a moderate improvement versus USD14 million of CFFO in 2011. Itabo registered an average collection rate from distribution companies of 57% of total account receivable billing during the first quarter of 2012, slightly above the collection rate achieved during the same period last year (50%). Days receivables outstanding stood at 106 at the end of March, a deterioration from 72 at the end of 2011. Liquidity is relatively strong. The company had USD44 million of cash on hand at the end of March and no short-term debt. Julio Ugueto +58 212 286-3356 julio.ugueto@fitchratings.com What Could Trigger a Rating Action Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Key Rating Drivers: Lower dependence of the sector on government subsidies could lead to a rating upgrade. The ratings would also be positively affected by a positive rating action on the sovereign. Latin America High Yield November 8, 2012 116 Corporates Recovery Analysis Itabo’s recovery rating of ‘RR4’ is constrained by the Dominican Republic recovery rating cap. The recovery analysis uses the average EBITDA reported by the company during the past five years as a starting point to estimate a stressed enterprise value. Fitch currently maintains a Positive Outlook for the Dominican sovereign and, as such, does not foresee a bankruptcy scenario for Itabo except for a low probability event, such as a severe fiscal crisis that would impact the company’s cash flow to a point of liquidity constraint. As a result, Fitch has opted for estimating a distressed enterprise valuation to arrive at the recovery scenario on the following page. The distressed EBITDA is calculated to cover the company’s fixed charges and critical maintenance capex, which is then adjusted by a conservative 5x multiple to arrive at a distressed company valuation. This distressed valuation would be associated with a severe fiscal crisis that would lead to a sustained cash flow drain for all generating companies in the country and contemplates the low probability event of a nonfriendly renegotiation scenario of the company’s PPA’s with distribution companies to the detriment of Itabo. In this hypothetical scenario it would be reasonable to expect a low demand for the company’s assets under a competitive bidding process, further supporting the distressed valuation commented above. Recovery Analysis Empresa Generadora de Electricidad Itabo S.A. (USD Mil.) IDR: Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Distressed EBITDA Market Multiple (x) Enterprise Value B Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Principal Amortization (Next 12 Months) Unsecured Priority Issuer Default Rating Senior Unsecured Amount Outstanding and Available R/C — 129.0 39.0 46.7 21 5.0 104.0 18 — 8 Distribution of Value by Priority Greater of Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Value Recovered — 93.6 Recovery Rate (%) — 73 Recovery Rating — RR2 104.0 10.4 93.6 Notching — +2 Rating B BB– Note: Numbers may not add due to rounding. Source: Fitch. Latin America High Yield November 8, 2012 117 Corporates Organizational Structure – Empresa Generadora de Electricidad Itabo S.A. Dominican Republic The AES Corporation IDR — B+ IDR — B Through FONPER 50.00% 50.00%a Empresa Generadora de Electricidad Itabo S.A. Operating Company (Guarantor) IDR — B Itabo Dominicana (Issuer) USD116 Senior Unsecured Notes Rating — B aIncludes former CDE employees share of approximately 0.03%. Does not include intermediate holding companies. IDR – Issuer default rating. Source: Fitch and Empresa Generadora de Electricidad Itabo S.A. Latin America High Yield November 8, 2012 118 Corporates Debt and Covenant Synopsis — Empresa Generadora de Electricidad Itabo, S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Itabo Dominicana Empresa Generadora de Electricidad Itabo, S.A. (Itabo) Nov. 12, 2010 Nov. 12, 2020 Senior Unsecured Notes Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) (x) Interest Coverage (Minimum) (x) 3.5 2.5 Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Restriction on Purchase of Notes Change-of-control clause at 101% of principal. Generally permits asset sales as long as it is divested at least equal to fair market value, it received at least 75% cash payment, and if the proceeds are used to reduce debt or are reinvested. The issuer is not allowed to incur additional debt. The guarantor is not allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. The guarantor can incur additional indebtedness in an aggregate principal amount not to exceed USD35 million. Itabo is not permitted to issue senior secured debt or to create any lien on any asset, property, or income without providing the same security to the existing notes. The issuer is not permitted to pay any dividends or make any other distribution to its shareholders. The guarantor is not permitted to make any restricted payments if, among other clauses, it cannot incur additional debt according to its limitation on indebtedness, an event of default has occurred, or if such payment exceeds 100% of combined net income. None. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Events of default include, but are not limited to, the interest reserve not being fully funded for more than five days and if the issuer, guarantor, or any restricted subsidiary defaults in any indebtedness of at least USD20.0 million. The issuer is allowed to redeem the notes in whole or in part at a preset redemption price. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 119 Corporates Financial Summary Empresa Generadora de Electricidad Itabo, S.A. (USD Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments. and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 39,140 39,140 15.3 15.3 9.6 (6.8) (1.0) 27,050 27,050 10.9 10.9 9.9 (7.5) (1.8) (5,243) (5,243) (2.6) (2.6) 17.6 (3.1) (24.0) 70,484 70,484 32.9 32.9 36.3 16.9 10.4 73,461 73,461 29.2 29.2 1.3 (0.2) 14.1 2.5 2.2 2.2 2.2 2.2 2.5 0.0 2.5 0.5 3.0 1.8 1.8 1.8 1.8 3.0 (0.2) 3.3 0.5 4.5 (0.3) (0.3) (0.3) (0.3) 4.5 0.7 4.6 2.8 7.2 3.2 3.2 3.2 3.2 7.2 2.7 6.3 6.4 0.3 4.2 4.2 4.2 4.2 0.3 1.0 2.2 0.9 2.9 3.3 2.2 3.3 2.2 0.1 — 2.9 4.8 2.8 4.8 2.8 0.1 — 1.6 (24.5) (10.9) (24.5) (10.9) 0.3 — 0.8 1.8 0.7 1.8 0.7 0.2 — 21.9 1.7 1.4 1.7 1.4 0.1 — 579,941 44,436 — 128,852 128,852 — 128,852 0 128,852 337,475 466,327 569,910 52,892 — 128,792 128,792 — 128,792 0 128,792 328,022 456,814 573,293 71,482 — 128,564 128,564 — 128,564 0 128,564 335,688 464,252 503,710 79,150 — 125,000 125,000 — 125,000 0 125,000 305,389 430,389 505,639 20,792 — 125,000 125,000 — 125,000 0 125,000 310,924 435,924 26,853 (10,518) 16,335 0 (31,914) (1,725) (17,304) 2,105 330 0 0 (427) (15,296) 29,911 (15,952) 13,959 0 (30,702) (1,725) (18,468) 361 (56) 0 0 (427) (18,590) 63,480 (20,650) 42,830 0 (15,258) (33,775) (6,203) 226 1,986 (1,629) 0 (2,243) (7,863) 134,635 (75,304) 59,331 0 (9,280) (13,790) 36,261 850 21,269 0 0 (16) 58,364 (11,905) 15,831 3,926 0 (4,410) 0 (484) 20,100 (3,453) 0 0 (20) 16,143 255,531 — 16,208 18,095 0 (3,193) 247,619 24.1 4,111 15,112 0 (5,963) 199,485 (6.9) (28,712) 18,217 0 (40,239) 214,370 (14.9) 51,028 21,747 0 32,003 251,778 25.6 54,080 17,622 0 42,095 Source: Fitch. Latin America High Yield November 8, 2012 120 Corporates Gol Linhas Aereas Inteligentes S.A. Full Rating Report Key Rating Drivers Ratings GOL Foreign Currency Long-Term IDR Senior Unsecured B+ B/RR5 Local Currency Long-Term IDR B+ National Long-Term Rating BBB(bra) VRG Linhas Aereas S.A. (VRG) Foreign Currency Long-Term IDR B+ High Financial Leverage: The company’s net leverage, as measured by the total adjusted net debt/EBITDAR ratio, reached 13.2x by the end of June 2012. This represents a sharp increase versus the 8.9x and 4.6x levels reached by the end of December 2011 and June 2011, respectively. Local Currency Long-Term IDR B+ National Long-Term Rating Senior Unsecured BBB(bra) BBB–(bra) GOL Finance Foreign Currency Long-Term IDR Senior Unsecured B+ B/RR5 Local Currency Long-Term IDR B+ IDR Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Negative Long-Term Local Currency IDR Negative National Long-Term Rating Negative Financial Data Gol Linhas Aereas Inteligentes S.A. (Consolidated) (BRL Mil.) Revenue EBITDAR EBITDAR Margin (%) Cash Short-Term Debt Total On-Balance Debt Total Adjusted Debt Gross Adjusted Leverage (x) Net Adjusted Leverage (x) FCF FCF Margin (%) 6/30/12 8,074 569 12/31/11 7,539 707 7.0 1,703 606 9.4 2,240 1,552 5,233 9,196 4,992 8,527 16.2 12.1 13.2 (969) (12.0) 8.9 (1,324) (17.6) Analysts José Vértiz +1 212 908-0641 jose.vertiz@fitchratings.com Liquidity Trend: At the end of June 2012, Gol Linhas Aereas Inteligentes S.A. (GOL) had BRL1.7 billion of cash and marketable securities, equivalent to 21% of the company’s LTM June 2012 revenue. During LTM June 2012, GOL’s FCF was negative BRL969 million. This figure is equivalent to about 57% and 19% of the company’s cash position and on-balance debt, respectively, at the end of June 2012. Potential liquidity deterioration during the second quarter of 2012, driven by continued negative free cash flow (FCF) that resulted in lower cash balance or incremental debt, is GOL’s main credit concern. Market Position and Limited Diversification: GOL maintained an important market share in the Brazilian domestic market of 39.6% (including recently acquired Webjet S.A.), measured by revenue passenger kilometers (RPK), at the end of August 2012. The ratings consider the company’s business model, which is primarily oriented to the domestic passenger market, and has limited product and geographic diversification. Capacity Management: Considering capacity from acquired Webjet S.A., GOL reached a total capacity of 32.5 billion, measured by available seat kilometers (ASK), during the January– August 2012 period. GOL’s management is likely to be conservative during the second half of 2012 in an effort to boost profitability and cash flow. This should result in 2012 growth rates for the company’s capacity in the range of –2% to –4%, which is expected to be positive in terms of the company’s yields. Macro and Business Environment: The ratings factor in the high degree of sensitivity of GOL’s financial performance based on several factors not controlled by the company, such as competition, performance of the local currency, and fuel price trends. These factors should continue to put pressure on the company’s margins in the short to medium term, which could offset the actions taken by management — in terms of capacity management and ex-fuel cost reduction — to improve its free cash flow generation during 2012. Subordination of Unsecured Debt Incorporated: The ‘B/RR5’ rating of the company’s unsecured public debt reflects below-average recovery prospects in the event of a default due to the subordination of the unsecured debt to secured debt related to aircraft finance. What Could Trigger a Rating Action Liquidity Trend Is Main Rating Driver: The Negative Outlook incorporates Fitch’s concern regarding a potential scenario of continued negative trends in the company’s FCF that could result in liquidity deterioration during the second half of 2012. A deterioration of the company’s liquidity position would likely result in downgrades of the company’s ratings. Conversely, better operational performance during 2012 could warrant a change in the Rating Outlook to Stable. Debora Jalles +55 21 4503-2629 debora.jalles@fitchratings.com Latin America High Yield November 8, 2012 121 Corporates Recovery Rating GOL’s unsecured public debt is rated ‘B’, one notch lower than the company’s IDR, with a recovery rating of ‘RR5’ suggesting below-average recovery prospects under a default scenario. GOL’s recovery ratings reflect Fitch’s belief that the company will be reorganized rather than liquidated in a bankruptcy scenario, given Fitch’s estimates that the company’s going concern value is higher than its projected liquidation value due mostly to the value associated with GOL’s market position in the Brazilian airline industry. In estimating the company’s going concern value, Fitch applies a valuation multiple of 6.0x to the company’s EBITDA post restructuring, which is estimated at BRL500 million annual basis and it would be reflecting the company’s reduced size and capacity post restructuring. After reductions for administrative and cooperative claims, Fitch arrives at an adjusted reorganization value of approximately BRL3 billion. Based upon these assumptions, the total senior secured debt of BRL2.1 billion recovers 100%, resulting in ‘RR1’ ratings for this type of debt. The unsecured debt, BRL3.1 billion which includes the senior notes, local debentures, and perpetual bonds recovers approximately 18% resulting in a recovery rating of ‘RR5’, reflecting the subordination of the unsecured debt to the secured debt. Recovery Analysis — GOL Linhas Aereas Inteligentes S.A. (GOL) (BRL Mil., As of June 30, 2012) Going Concern Enterprise Value EBITDA LTM June 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value N.A. — 500 6 3,000 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 400 — 75 475 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 3,000 300 2,700 Distribution of Value Secured Priority Secured Lien 2,127 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecured Value Recovered Recovery (%) 2,127 100 2,700 2,127 573 0 573 Lien 3106 Value Recovered Recovery (%) 573 18 Concession Allocation — Recovery Rating RR5 Notching (1) Rating B N.A. – Not applicable. Source: Fitch Ratings. Latin America High Yield November 8, 2012 122 Corporates Organizational Structure — Gol Linhas Aereas Inteligentes S.A. (GOL) (As of June 30, 2012) Fund de Investimento de Participacoes Volluto (Oliveira Family) 62.47% Free Float 27.29% Others 9.97% Gol Linhas Aereas Inteligentes S.A. (GOL) 100.00% VRG Linhas Aereas S.A. (VRG) 100.00% Webjet Linhas Aereas S.A. (Webjet) 100.00% Gol Finance Cayman 100.00% GAC Inc. 100.00% Sky Finance Source: GOL. Latin America High Yield November 8, 2012 123 Corporates Debt and Covenant Synopsis Gol Linhas Aereas Inteligentes S.A. and Subsidiaries International Issuances (Foreign Currency Notes) Issuer GOL Finance Guarantors GOL Linhas Aéreas Inteligentes S.A. and GOL Transportes Aéreos S.A. International Issuance #1: Issue Date Maturity Date Description of Debt Amount April 5, 2006 N.A. Senior Unsecured Guaranteed Perpetual Notes USD200 Mil. International Issuance #2: Issue Date Maturity Date Description of Debt Amount March 22, 2007 April 3, 2017 Senior Unsecured Guaranteed Notes USD225 Mil. International Issuance #3: Issue Date Maturity Date Description of Debt Amount July 20, 2010 July 20, 2020 Senior Unsecured Guaranteed Notes USD300 Mil. Main Characteristics The following is a summary of the main characteristics included in the indentures governing the above-indicated international. Ranking The notes will be unsecured and will rank equally with the other unsecured unsubordinated indebtedness the Issuer may incur. Gol Linhas Aéreas Inteligentes S.A. and Gol Transportes Aéreos S.A., — the guarantors — will unconditionally guarantee, jointly and severally, on a senior unsecured basis, all of the Issuer’s obligations pursuant to the notes. The guarantees will rank equally in right of payment with the other unsecured unsubordinated indebtedness and guarantees of the guarantors. The notes will be effectively junior to the issuer’s and the guarantors’ secured indebtedness. Covenant Summary Negative Pledge Change of Control Limit of Indebtedness Cross Default Debt Service Coverage Ratio Merger Restriction Limit on Subsidiary Debt Certain Sales of Assets No Yes No Yes No Yes No Yes N.A. – Not applicable. Source: Gol Linhas Aereas Inteligentes S.A. Latin America High Yield November 8, 2012 124 Corporates Debt and Covenant Synopsis Gol Linhas Aereas Inteligentes S.A. and Subsidiaries Local Debentures Issuer Guarantors VRG Linhas Aéreas GOL Linhas Aéreas Inteligentes S.A. Local Issuance #1 Issue Date Maturity Date Description of Debt Collateral Amount May 13, 2009 Sept. 13, 2015 4th Issue of Simple, Nonconvertible Debentures – Unsecured Debt N.A. BRL 600 Mil. Local Issuance #2 Issue Date Maturity Date Description of Debt Collateral Amount June 20, 2011 June 10, 2017 5th Issue of Simple, Nonconvertible Debentures – Unsecured Debt N.A. BRL 500 Mil. Other Loans and Financings BNDES Loan IFC Loan Covenants Status (Debentures, Loans and Financings) Restrictive Covenants Net Financial Debt / EBITDAR In Compliance (Jun 2012) Waiver Current Assets / Current Liabilities In Compliance (Jun 2012) Waiver Debt Coverage Ratio. In Compliance (Jun 2012) Waiver EBITDA/Debt Service In Compliance (Jun 2012) Waiver BRL15.5 Mil. outstanding as of June 30, 2012 BRL25.6 Mil. outstanding as of June 2012 The following information has been extracted from the notes in the company’s financial statements. VRG has restrictive covenants (covenants) in its financing agreements with the following financial institutions: IFC, Bradesco and Banco do Brasil (Debentures IV and V, respectively). The restrictive covenants measures for these loans are: (1) net financial debt/ EBITDAR, (2) current assets/current liabilities, (3) EBITDA/debt service, and (4) debt coverage ratio. On Dec. 31, 2011, the company and its subsidiaries did not reach the minimum standards established for the financing from the IFC, BNDES and the debentures IV and V, bond to EBITDA due to accumulated losses in the year ended Dec. 31, 2011. VRG issued to BNDES a letter of guarantee of BRL15.5 million, whose amount exceeds the current debt, and is not therefore subject to liquidity problems in case it is required to settle such debts. The following is a summary of the main restrictive covenants that apply for the VRG debentures (4th and 5th) and the BNDES and IFC loans above-indicated. Level as of June 30, 2012: 13x No Yes, until December 2012 Level as of June 30, 2012: 1.0x No Yes, until December 2012 Level as of June 30, 2012: 0.95x No Yes, until December 2012 Level as of June 30, 2012: 0.95x No Yes, until December 2012 N.A. – Not applicable. Source: Gol Linhas Aereas Inteligentes S.A. Latin America High Yield November 8, 2012 125 Corporates Financial Summary — GOL Linhas Aereas Inteligentes S.A. (BRL 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2008 2009 2010 2011 LTM Ended 6/30/12 36,479 681,568 0.6 10.6 5.9 (4.0) (72.0) 556,145 1,206,828 9.2 20.0 14.1 4.9 48.4 979,399 1,535,061 14.0 22.0 17.2 (2.0) 7.7 202,000 707,058 2.7 9.4 9.0 (18.0) (29.0) 2,555 568,723 0.0 7.0 10.7 (12.0) (58.0) — 0.15 0.77 0.03 0.37 0.60 0.01 0.36 0.47 2.79 1.93 1.29 0.63 0.79 1.55 0.66 2.28 2.82 3.36 2.60 1.65 1.36 1.20 1.95 0.35 3.08 1.09 0.90 0.40 0.70 0.10 0.28 0.95 — 0.69 (1.00) 1.03 — 0.51 — 0.33 1.02 — 1.11 — 14.97 93.38 82.00 11.62 11.01 8.05 — 0.28 5.29 5.63 3.08 6.37 5.19 8.81 — 0.19 4.19 3.82 1.80 4.97 3.68 10.96 — 0.09 8.84 24.71 13.62 12.06 8.89 11.66 — 0.31 8.06 2,048.11 1,381.70 16.17 13.18 11.98 0.41 0.12 7,258,578 414,915 967,452 2,438,881 3,406,333 — 3,406,333 4,515,623 7,921,956 1,071,608 8,993,564 8,720,120 1,422,852 591,695 2,542,167 3,133,862 — 3,133,862 4,554,781 7,688,643 2,609,986 10,298,629 9,063,847 1,978,464 346,008 3,395,080 3,741,088 — 3,741,088 3,889,634 7,630,722 2,929,169 10,559,891 10,655,141 2,239,574 1,552,440 3,439,008 4,991,448 — 4,991,448 3,535,406 8,526,854 2,205,911 10,732,765 10,454,125 1,702,666 605,678 4,627,238 5,232,916 — 5,232,916 3,963,176 9,196,092 1,468,008 10,664,100 (358,041) 524,901 166,860 — (356,863) (36,258) (226,261) — 397,513 (533,863) — (41,180) (403,791) 514,799 (57,541) 457,258 — (161,906) 295,352 — 167,328 (42,416) 811,654 (18,841) 1,213,077 887,883 (163,986) 723,897 — (664,229) (185,839) (126,171) — (48,990) 638,638 120,861 (10,888) 573,450 (49,226) (553,294) (602,520) — (670,880) (50,866) (1,324,266) (114,748) (74,594) 628,187 845 159,005 (725,571) 18,718 (228,560) (209,842) — (759,269) (9) (969,120) (114,748) 193,576 71,151 38 158,824 (660,279) 6,406,193 29.7 (88,648) 242,099 645,089 (1,239,347) 6,025,382 (6.0) 413,292 288,112 650,683 890,832 6,979,447 15.8 697,795 376,743 555,662 214,197 7,539,308 8.0 (244,504) 509,286 505,058 (751,538) 8,073,971 14.3 (399,583) 555,416 566,168 (1,181,247) Source: Company reports. Latin America High Yield November 8, 2012 126 Corporates Grupo FAMSA S.A.B. de C.V. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured due 2015 B+ B+ Local Currency Long-Term IDR B+ National Long-Term Rating BBB(mex) Short-Term Rating F3(mex) MXN 1 Billion Cebures due 2014 BBB(mex) MXN1 Billion Short-Term Cebures Program F3(mex) Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Financial Data Grupo Famsa, S.A.B. de C.V. (MXN Mil.) Revenue EBITDA Total Debt Gross Interest Expense Debt/EBITDA (x) EBITDA/ Gross Interest Expense (x) 6/30/12 14,518 1,932 17,176 2011 15,295 1,698 16,252 1,268 8.9 1,213 9.6 1.5 1.4 Declining U.S. Performance Forces Closures: Driven by poorly performing West Coast stores, Grupo FAMSA S.A.B. de C.V.’s (Famsa) same-store sales (SSS) of U.S. operations has declined since 2008, notching double-digit decreases in the last two years, resulting in negative EBITDA of MXN202 million for 2011. Management plans to wind down all West Coast operations by the end of 2012. This will likely improve leverage levels by increasing EBITDA and/or reducing indebtedness. Low SSS Constrains Revenues: SSS of Mexican operations (including financial revenues) underperformed that of Famsa’s ANTAD (National Retailers Association of Mexico) peers over the last few quarters. As of second-quarter 2012, on a LTM basis, consolidated revenues decreased 5.7%, while EBITDA grew 4.4%. Retail Strengths and Banking Subsidiary Support Ratings: Famsa’s ratings reflect its retail operation strengths, including market position in Mexico, geographic and product diversity, and broadly stable operating cash flow. Famsa’s sales benefit from financing provided by its banking subsidiary, Banco Ahorro Famsa (BAF, or the Bank), which is rated ‘BBB–(mex)’ by Fitch Ratings. BAF’s Asset Quality Remains Weak: The quality of BAF’s loan portfolio, which is mainly composed of consumer loans (73.5% of total assets), has deteriorated as borrowers’ payment capacity has suffered from adverse economic conditions. Asset quality remains weak despite ample past due loans coverage ratios (143.7% in 2011). The bank’s commercial loan portfolio, which is highly concentrated, grew 22.7% in 2011. Leverage Is High: LTM consolidated total debt-to-EBITDA and adjusted debt-to-EBITDAR ratios (excluding bank deposits) have stayed broadly stable at 3.0x and 4.2x, respectively. Including bank deposit leverage, these ratios are high at 8.9x and 8.3x, respectively. What Could Trigger a Rating Action Improved Sales: Going forward, Fitch would favorably view an increase in SSS, an improved mix of sales, or an upgrade of BAF. Decreases in EBITDA: Conversely, Fitch would unfavorably view a decrease in EBITDA generation by Famsa’s retail operation, failure to deleverage after FAMSA USA’s downsizing, or an increase in short-term debt as a percentage of total (nondepositary) debt. Liquidity and Debt Structure Analysts Miguel Guzmán Betancourt +52 81 8399-9100 miguel.guzman@fitchratings.com Indalecio Riojas +52 81 8399-9100 indalecio.riojas@fitchratings.com Latin America High Yield November 8, 2012 Wieldy Short-Term Debt: Short-term debt as of June 30, 2012 was about MXN2.1 billion (excluding BAF’s customer deposits), a manageable figure when taking into account the company’s cash flow generation, cash holdings of about MXN1.8 billion (approximately MXN1.4 billion outside of BAF, a regulated banking entity), and track record of successfully refinancing short-term debt. The company has not issued dividends over last few years and projects about MXN350 million of capex for 2012. 127 Corporates Recovery Rating After considering potential going concern and liquidation scenarios, Fitch used a liquidation valuation for recovery calculations because it would represent the most value to debt holders (as a result of accounts receivables being mostly financed by BAF, and thus, benefitting from IPAB’s bank deposit insurance). Since BAF’s customer deposits have seniority over other institutional debt as per regulations, remaining debt (senior notes and bank debt) was rated ‘RR4’ due to a 34% recovery estimate. Recovery Analysis Grupo Famsa, S.A.B. de C.V. (USD Mil.) IDR: B+ Liquidation Value Cash Accounts Receivable Inventory Net PPE Total Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 1,268.1 1,268.1 1,837.8 17,161.0 1,923.1 2,361.6 23,283.5 Advance Available to Rate (%) Creditors 0 75 12,870.7 40 769.3 50 1,180.8 14,820.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 14,820.8 1,482.1 13,338.7 Distribution of Value Secured Priority Senior Secured Secured Lien 11,397.7 0.0 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecured Unsecured Lien 5,778.6 — Value Recovered 11,397.7 — Recovery (%) 100 — Recovery Rating RR3 — Notching +1 — Rating BB– — 13,338.7 11,397.7 1,941.0 97.0 1,843.9 Value Recovered 1,941.0 — Recovery (%) 34 — Concession Allocation (%) 100 — Recovery Rating RR4 — Notching 0 — Rating B+ — Source: Fitch. Latin America High Yield November 8, 2012 128 Corporates Organizational Structure — Grupo Famsa S.A.B. de C.V. (MXN Mil., As of 2Q12) Grupo Famsa, S.A.B. de C.V. Senior Notes due 2015 Cebures Issues Other Issuances Bank Debt 2,682 2,000 536 449 100.00% 99.99% Famsa USA Deutche Bank Banco Ahorro Famsa 53.6 Bank Deposits Bank Debt 11,398 58 Source: Grupo Famsa S.A.B. de C.V. Latin America High Yield November 8, 2012 129 Corporates Debt and Covenant Synopsis — Grupo Famsa, S.A.B. de C.V. (Foreign Currency Notes) Overview Issuer Grupo Famsa, S.A.B. de C.V. Guarantors All major subsidiaries except Banco Ahorro FAMSA, S.A. de C.V. Document Date July 20, 2010 Maturity Date July 20, 2015 Description of Debt USD200 million aggregate principal amount of 11% senior notes. Acquisitions/Divestitures Change-of-Control If a change of control occurs, each holder of notes may require the issuer to repurchase all or a portion of its notes at a purchase price equal to Provision 101.0% of the principal amount, plus accrued and unpaid interest through the date of purchase. Limitation on Assets Under the terms of the indenture, Famsa and its restricted subsidiaries will not realize an asset sale unless: Sale 1. Famsa or the applicable restricted subsidiary receives consideration at the time of the asset sale at least equal to the fair market value of the assets sold; and 2. At least 75% of the consideration received for the assets sold by Famsa or the restricted subsidiary, in the asset sale shall be in the form of cash received at the time of the sale. Notwithstanding, Famsa shall not consummate an asset sale with respect to the capital stock or assets of a bank regulated subsidiary. A disposition of accounts receivable is not considered an asset sale. Limitation on Famsa will not incur any indebtedness, except if the consolidated leverage ratio is not greater than (1) 3.5 to 1.0, if such incurrence occurs prior Indebtedness to May 1, 2013, or (2) 3.25 to 1.0, if such incurrence occurs on or after May 1, 2013. Notwithstanding the paragraph above, Famsa and its restricted subsidiaries, as applicable, may incur the following indebtedness: 1. Indebtedness in respect of the notes (including any note guarantee in respect thereof) excluding additional notes; 2. Guarantees by Famsa or any subsidiary guarantor of indebtedness of Famsa; provided that, if any such guarantee is of subordinated indebtedness, then the note guarantee of such subsidiary guarantor shall be senior to such subsidiary guarantor’s guarantee; and 3. Indebtedness incurred by Famsa or any subsidiary guarantor under the credit facilities an aggregate principal amount outstanding at any one time not to exceed the greater of (x). Limitation on Famsa will not permit any restricted subsidiary that is not a subsidiary guarantor to guarantee any indebtedness of the company, unless an Guarantees effective provision is made to secure the notes, on an equal and ratable basis with such guarantee or lien. Limitation on Restricted Famsa and its restricted subsidiaries will not make restricted payments if: Payments 1. A default shall have occurred and be continuing; 2. Famsa is not able to incur at least USD1.00 of additional indebtedness. 3. The aggregate amount of the proposed restricted payments exceeds the sum of: a. 50% of Famsa’s cumulative consolidated net income plus b. 100% of the aggregate net cash proceeds received by Famsa from any: i. Contribution to equity capital not representing an interest in disqualified capital stock or issuance and sale of qualified capital stock of Famsa, in each case, subsequent to the issue date, or ii. Issuance and sale subsequent to the issue of any indebtedness of Famsa or any restricted subsidiary that has been converted into or exchanged for qualified capital stock of Famsa. Limitation on Merger, Upon any merger or any transfer of assets of Famsa and its restricted subsidiaries in accordance with this covenant, in which Famsa is not the Consolidation, and Sale continuing corporation, the surviving entity formed by such consolidation, will succeed Famsa under the indenture and the notes with the same of Assets effect as if such surviving entity had been named as such. Limitation on Famsa and its restricted subsidiaries will not enter into any transaction or series of related transactions (including, without limitation, the Transactions with (purchase, sale, lease, etc.), unless: Affiliates. 1. The terms of such affiliate transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a person that is not a Famsa affiliate; 2. In the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD15.0 million, the terms of such affiliate transaction will be approved by a majority of the members of Famsa’s board of directors. 3. In the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD25.0 million, Famsa will obtain a favorable opinion as to the fairness of such affiliate transaction to the company and the relevant restricted subsidiary (if any) from a financial point of view from an independent financial advisor and file the same with the trustee. Source: Issuer. Latin America High Yield November 8, 2012 130 Corporates Financial Summary Grupo Famsa, S.A.B. de C.V. (MXN 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 1,931,665 2,759,783 0.1 0.2 0.1 (0.1) 0.1 1,697,602 2,589,378 0.1 0.2 0.1 (0.1) 0.0 1,701,666 2,595,699 0.1 0.2 0.1 (0.2) 0.1 1,554,429 2,475,328 0.1 0.2 0.1 (0.1) 0.0 1,456,029 2,261,029 0.1 0.2 0.2 (0.2) 0.1 2.5 1.5 1.3 0.1 0.2 1.9 (0.0) 0.1 (10.6) 2.7 1.4 1.2 0.1 0.2 2.0 (0.1) 0.0 (5.8) 1.5 1.6 1.3 0.1 0.2 1.3 (0.2) (0.1) (14.3) 1.6 1.4 1.2 0.1 0.2 1.3 (0.1) 0.1 (6.8) 3.5 1.7 1.3 0.1 0.2 2.3 (0.1) 0.0 (2.3) 5.7 8.9 7.9 8.3 7.7 0.1 — 0.8 5.4 9.6 8.7 8.7 8.1 0.1 — 0.8 7.9 8.0 7.3 7.6 7.2 0.1 — 0.8 6.5 7.3 6.2 7.2 6.5 0.1 — 0.9 4.1 6.9 5.9 6.9 6.3 0.1 — 1.0 28,021,785 1,837,782 13,483,198 3,693,086 17,176,284 — 17,176,284 5,796,826 22,973,110 8,566,524 31,539,634 28,293,707 1,451,355 12,449,563 3,802,680 16,252,243 — 16,252,243 6,242,432 22,494,675 9,202,749 31,697,424 25,668,055 1,114,459 11,101,913 2,486,348 13,588,261 — 13,588,261 6,258,231 19,846,492 8,986,100 28,832,592 22,604,443 1,706,086 10,266,716 1,009,640 11,276,356 — 11,276,356 6,446,293 17,722,649 8,367,366 26,090,015 21,007,574 1,448,535 10,054,377 — 10,054,377 — 10,054,377 5,635,000 15,689,377 7,294,969 22,984,346 1,908,138 (3,614,471) (1,706,333) — (160,894) — (1,867,227) 38,895 2,014 593,468 — 1,672,706 439,856 2,089,020 (3,808,310) (1,719,290) — (294,653) — (2,013,943) 5,081 1,376 815,606 — 1,528,776 336,896 539,230 (3,349,890) (2,810,660) — (196,466) — (3,007,126) 5,000 — 2,410,499 — — (591,627) 667,170 (2,580,349) (1,913,179) — (280,742) — (2,193,921) 11,234 — 1,236,705 1,203,533 — 257,551 2,149,876 (3,738,293) (1,588,417) — (700,682) — (2,289,099) 12,485 — 272,657 — 2,858,299 854,342 14,518,433 (6) 1,559,880 1,268,103 828,118 447,005 15,294,907 2 1,292,299 1,213,079 891,776 105,501 14,992,877 0 1,306,870 1,088,829 894,033 705,624 14,946,922 1 1,123,162 1,125,446 920,899 97,355 14,762,221 4 1,036,640 871,166 805,000 560,865 Source: Fitch. Latin America High Yield November 8, 2012 131 Corporates Grupo Posadas S.A.B. de C.V. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured Notes due 2015 B B+/RR3 Local Currency Long-Term IDR B National Long-Term Rating MXN2.25 billion Cebures due 2013 BB+(mex) BB+(mex) IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR National Long-Term Rating Stable Stable Stable Financial Data Grupo Posadas, S.A.B. de C.V. (MXN Mil.) Revenue EBITDA Total Debt Gross Interest Expense Debt/EBITDA (x) EBITDA/ Gross Interest Expense (x) LTM 6/30/12 7,867 968 6,055 2011 7,296 947 6,329 515 6.3 481 6.7 1.9 2.0 High Leverage: Grupo Posadas, S.A. de C.V. (Posadas) had a total adjusted debt-toEBITDAR ratio of 6.5x as of June 30, 2012 on a LTM basis, a slight increase from 6.0x during the previous 12-month period. The company’s high leverage reflects a weakening trend, a result of the depreciation of the Mexican peso (MXN) against the U.S. dollar (USD) and adverse economic conditions in Mexico. Negative Free Cash Flow: Posadas had been able to adjust and adapt its operations during previous economic downturns, but the current economic environment, coupled with security concerns, has challenged the company. Funds from operations and operating cash flow have trended downward since 2008 and free cash flow after dividends and capex has been negative since 2010. High Correlation to Economic Cycles: The ratings of Posadas consider the industry’s high correlation to economic cycles, which negatively affects operating trends in downturns and increases volatility of operating results. The use of multiple hotel formats allows the company to target domestic and international business travelers of different income levels in addition to tourists, thus diversifying its revenue base. Geographic diversification is limited, however, as Posadas’ operations are primarily located in Mexico. Recent Improvements in RevPAR: The company has been able to improve its operations in the second quarter of 2012 versus the same quarter last year, mainly due to improved revenue per available room (RevPAR) in urban and coastal properties, a consequence of high occupation levels. Increased RevPAR has compensated for soft cash flow in the vacation club segment. While average daily rates (ADRs) for urban locations have remained broadly flat, ADRs for coastal locations continue to be under pressure. What Could Trigger a Rating Action Analysts Miguel Guzmán Betancourt +52 81 8399-9100 miguel.guzman@fitchratings.com Sergio Rodriguez, CFA +52 81 8399-9100 sergio.rodriguez@fitchratings.com Latin America High Yield November 8, 2012 Decreased Leverage: An inability to refinance the 2013 maturity in advance is considered a significant credit risk for the issuer. Any nonrecurring cash infusion, which diminishes debt and assuages liquidity concerns, would be considered beneficial for Posadas’ creditworthiness. Deterioration of Operating Trends: Fitch would negatively view any weakening of operating trends or decreases in RevPAR that could lead to lower EBITDA and cash flow levels. 132 Corporates Recovery Rating Both a going concern scenario and a liquidation scenario were considered. In deriving a distressed going concern valuation, Fitch only slightly discounted the company’s LTM EBITDA, as it is already low by historical standards. We also took into account the potential loss of 19% of it EBITDA due to the divestiture of the South American operations and then applied a 4.6x distressed EBITDA multiple. This multiple is at the low end of transactions seen in the industry. In estimating a liquidation valuation, we discounted accounts receivable heavily, as they mostly represent time share contracts that could prove to be, for the most part, uncollectable in a scenario in which the company ceases to exist. Since bank debt has seniority, due to collateral, the remaining debt (senior notes and local Cebures issuance) was rated RR4, due to its 38% recovery estimate. Recovery Analysis Grupo Posadas S.A.B. de C.V. (MXN Mil.) Going Concern Enterprise Value Sept. 30, 2012 LTM EBITDA (Pro Forma) Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 1,056.0 27 772.4 7.4 5,715.8 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Adminstrative Claims (10%) Adjusted Enterprise Value for Claims Liquidation Value Cash A/R Inventory Net PPE Total 791.9 1,559.1 50.1 7,719.6 — Advance Rate (%) 0 80 50 20 Available to Creditors — 1,247.3 25.0 2,133.6 2,816.3 340.9 288.7 142.9 772.4 5,715.8 571.576 772.4 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 5,144.2 899.5 4,244.7 212.2 4,032.4 Distribution of Value Unsecured Priority Senior Unsecured Lien 3,405.3 Value Concession Recovered Recovery (%) Allocation (%) 3,405.3 100 100 Recovery Rating RR3 Notching +1 Rating B+ Note: Numbers may not add due to rounding. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Fitch Ratings. Latin America High Yield November 8, 2012 133 Corporates Organizational Structure — Grupo Posadas S.A.B. de C.V. (As of 2Q12) Grupo Posadas, S.A.B. de C.V. Certificados Bursatiles Due 2013 MXN2,250 Mil. Senior Notes 2015 MXN2,676 Mil. 100% Promoción de Inversiones Hoteleras, S.A. de C.V. Scotiabank MXN285 Mil. 100% Compañia Hotelera Los Cabos, S.A. de C.V. Bancomext MXN359 Mil. 100% Posadas do Brasil Bradesco MXN99 Mil. 100% Fiesta Americana Vacation Credit Banorte MXN386 Mil. Source: Grupo Posadas S.A.B. de C.V. Latin America High Yield November 8, 2012 134 Corporates Debt and Covenant Synopsis Grupo Posadas, S.A.B. de C.V. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Leverage (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision Grupo Posadas, S.A.B. de C.V. All major subsidiaries except Fondo Inmobiliario Posadas, S.A. de C.V. Feb. 5, 2010 Jan. 15, 2015 USD200 million aggregate principal amount of 9.250% senior notes. N.A. N.A. If Posadas experiences a change of control, holders of the notes may require them to repurchase all or part of the notes at 101% of their principal amount, plus accrued and unpaid interest and any additional amounts until the redemption date. Limitation on Assets Sale Under the terms of the indenture, Posadas will not, and will not permit any restricted subsidiary to consummate any asset sale, unless: 1) The consideration received by Posadas or such restricted subsidiary is at least equal to the fair market value of the assets sold or disposed of as determined in good faith by Posadas’ board of directors (including as to the value of all noncash consideration); 2) Except in the case of any sale of time share, full or fractional ownership or membership interests in the ordinary course of the vacation club business, at least 75% of the consideration received by Posadas or such restricted subsidiary, as the case may be, from such asset sale shall be in the form of cash or temporary cash investments and is received at the time of such disposition; 3) An amount equal to 100% of the net cash proceeds from such asset sale is either applied to a) the repayment of indebtedness of the issuer or any restricted subsidiary, which is secured by a permitted lien (with a corresponding reduction in the commitment with respect thereto) or b) the investment in or acquisition of assets related to a permitted business, in each case, within 365 days from the later of the date of such asset sale or the receipt of the net cash proceeds. Limitation on Indebtedness 1) Under the terms of the indenture, Posadas will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, incur anyindebtedness provided, however, that Posadas may incur indebtedness and any restricted subsidiary may incur indebtedness if on the date of the incurrence of such indebtedness, the consolidated interest coverage ratio would be greater than 2.5 to 1.0. 2) For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of indebtedness, the U.S. dollar-equivalent principal amount of indebtedness denominated in a non-U.S. currency will be calculated based on the relevant currency exchange rate in effect on the date such indebtedness was incurred or, in the case of revolving credit indebtedness, first committed; provided that if such indebtedness is incurred to refinance other indebtedness denominated in a non-U.S. currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction will be deemed not to have been exceeded so long as the principal amount of such refinancing indebtedness does not exceed the principal amount of such indebtedness being refinanced. 3) For purposes of determining any particular amount of indebtedness: a) guarantees, liens, or obligations with respect to letters of credit supporting indebtedness otherwise included in the determination of such particular amount shall not be included and b) any liens granted pursuant to the equal and ratable provisions of the indenture shall not be treated as indebtedness. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the types of indebtedness described herein, Posadas, in its sole discretion, shall classify, and from time to time may reclassify, such item of Indebtedness. Limitation on Restricted Posadas will not, and will not cause or permit any of the restricted subsidiaries to, directly or indirectly: Payments 1) Declare or pay any dividend or make any distribution other than a) dividends or distributions payable in qualified capital sock of Posadas and b) in the case of restricted subsidiaries, dividends, or distributions to Posadas or any other restricted subsidiary and pro rata dividends or distributions payable to the other holders of the same class of capital stock of such restricted subsidiary on or in respect of shares of its capital stock to holders of such capital stock; 2) Purchase, redeem, or otherwise acquire or retire for value any capital stock of Posadas or acquire shares of any class of such capital stock other than capital stock owned by Posadas or any wholly owned restricted subsidiary (other than in exchange for its capital stock) which is not disqualified stock; 3) Make any principal payment on, purchase, redeem, prepay, decrease, or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment (other than the purchase, redemption, prepayment, or other acquisition of any such subordinated indebtedness in anticipation of any such sinking fund obligation, principal installment or final maturity, in each case, due within one year of such purchase, redemption, prepayment, or other acquisition), any indebtedness that is subordinate or junior in right of payment to the notes or the guarantees; or 4) Make any investment (other than permitted investments), if at the time of such restricted payment or immediately after giving effect thereto a default or an event of default shall have occurred and be continuing. N.A. Not applicable. Continued on the next page. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 135 Corporates Debt and Covenant Synopsis Grupo Posadas, S.A.B. de C.V. (Continued) (Foreign Currency Notes) Acceleration Limitation on Transactions with Affiliates If an event of default occurs and is continuing under the indenture, either the trustee or the holders of at least 25% in aggregate principal amount of the notes then outstanding, by written notice to Posadas (and to the trustee if such notice is given by the holders), may, and the trustee at the request of such holders shall, declare the principal of, and accrued interest (together with any additional amounts) on the notes to be immediately due and payable. Upon such a declaration of acceleration, such principal and accrued interest shall be immediately due and payable. Posadas will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, or exchange of any property or the rendering of any service) with, or for the benefit of, any affiliate of posadas (each an “Affiliate Transaction”), other than: 1) Affiliate transactions permitted; and 2) Certain affiliate transactions meeting the following requirements: a) b) c) Limits on Consolidations or Mergers Optional Redemption The terms of such affiliate transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a person that is not an affiliate of Posadas; In the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD5.0 million (or the equivalent in other currencies), the terms of such affiliate transaction shall be approved by a majority of the members of the board of directors of Posadas or such restricted subsidiary, as the case may be, such approval to be evidenced by a board resolution stating that such members of the board of directors have determined that such transaction complies with clause (a) immediately above; In the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD15.0 million (or the equivalent in other currencies), the terms of such Affiliate Transaction will be set forth in an Officers’ Certificate delivered to the trustee stating that such transaction complies with clauses (a) and (b) immediately above; and d) in the event that such Affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD20.0 million (or the equivalent in other currencies), the issuer will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such affiliate transaction to the issuer and any such restricted subsidiary, if any, from a financial point of view from an independent financial advisor and file the same with Trustee. Posadas will not: 1) In one or more related transactions, consolidate with or merge into or reorganize with or into, or directly or indirectly, transfer, convey, sell, lease, or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other person or 2) Permit any guarantor to, in one or more related transactions, consolidate with or merge into or reorganize with or into, or directly or indirectly, transfer, convey, sell, lease, or otherwise dispose of all or substantially all of its properties and assets as an entirety to, any other person in each case. They may redeem the notes, in whole or in part, at a redemption price based on a “make-whole” premium. Prior to Jan. 15, 2013, they may redeem up to 35% of the aggregate principal amount of the notes with the proceeds from certain qualified equity offerings. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 136 Corporates Financial Summary Grupo Posadas, S.A.B. de C.V. (MXN Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 968 1,357 12.3 17.2 6.4 (4.4) (10.4) 947 1,324 13.0 18.1 8.3 (3.9) (16.9) 1,022 1,382 15.6 21.2 9.4 (2.8) 1.0 1,243 1,621 17.5 22.9 11.2 9.8 5.9 1,531 1,864 22.2 27.1 18.1 20.3 (12.8) 1.2 1.9 1.5 0.3 0.4 1.1 0.1 0.2 (3.7) 1.5 2.0 1.5 0.9 0.9 1.3 0.2 0.6 (1.4) 1.9 2.3 1.7 1.5 1.4 1.5 0.4 1.3 1.2 3.1 3.3 2.2 0.9 1.0 2.0 0.8 1.3 6.1 5.0 3.6 2.5 1.0 1.0 3.2 1.2 1.8 4.6 8.8 6.3 5.8 6.5 6.1 8.7 — 0.4 8.8 6.7 6.2 7.5 7.1 7.9 — 0.1 7.6 5.7 5.1 6.8 6.4 8.4 — 0.0 5.9 4.0 3.5 5.5 5.1 7.3 — 0.2 3.7 3.5 3.0 4.8 4.4 8.7 — 0.2 16,455 473 2,645 3,410 6,055 — 6,055 2,723 8,778 6,818 15,596 12,695 422 554 5,775 6,329 — 6,329 3,549 9,878 3,615 13,493 13,334 575 211 5,609 5,820 — 5,820 3,595 9,415 3,670 13,085 13,261 658 940 4,018 4,958 — 4,958 4,013 8,971 4,586 13,557 13,652 831 1,057 4,307 5,364 — 5,364 3,662 9,026 4,398 13,424 97 (363) (266) — (71) (12) (578) (36) 192 (774) 889 1 196) 261 (418) (157) — (116) (12) (285) (36) 116 (11) 42 18 (156) 422 (134) 288 — (238) (232) (182) — (351) 1,018 — (611) (126) 769 84 853 — (139) (23) 691 — (443) (10) (1) (410) (173) 1,681 325 2,006 — (433) (174) 1,399 — (547) 42 — (444) 450 7,867 13.8 542 515 389 (573) 7,296 11.7 546 481 377 (616) 6,531 (7.8) 590 452 360 40 7,083 2.9 806 375 378 267 6,884 15.2 1,125 420 333 (622) Source: Fitch. Latin America High Yield November 8, 2012 137 Corporates Grupo Senda Autotransportes, S.A. de C.V. (Grupo Senda) Full Rating Report Ratings Key Rating Drivers Foreign Currency Long-Term IDR B Senior Secured B/RR4 Local Currency Long-Term IDR B Liquidity is Main Credit Concern: Grupo Senda Autotransportes, S.A. de C.V. (Grupo Senda) has limited financial flexibility due to a weak liquidity position. The company remains dependent upon its creditors to roll over short-term debt due to its weak cash position. As of June 30, 2012, the company had MXN102 million of cash and marketable securities and MXN417 million of short-term debt. During the LTM ended in June, the company generated MXN302 million of cash flow from operations. IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Grupo Senda (MXN Mil.) Revenues EBITDA EBITDA Margin % CFFO Capex FCF FCF Margin % Cash Short-Term Debt Total Debt EBITDA/ Total Debt (x) FCF Debt Service Coverage (x) Cash as % of Revenues Cash/Revenues (Days) 6/30/12 3,785 898 23.7 302 214 88 2.3 102 417 2,951 12/31/11 3,665 765 22.2 307 346 (40) (1.1) 169 496 3,149 3.3 3.9 0.6 0.4 2.7 4.6 10 17 Market Position and Operational Risks Incorporated: The company maintains a strong market position in Mexico’s highly competitive and fragmented intercity bus transportation industry. Grupo Senda is exposed to industry-related risks such as seasonal fluctuations in passengers, cyclicality risk affecting the personnel segment, and volatile fuel costs. Rising concerns about security in Mexico is also an issue that negatively affects the tourism and transportation industries. Foreign Exchange Risk a Constraint: Grupo Senda is exposed to foreign exchange risk as about 90% of its revenues are in Mexican pesos and approximately 75% of its debt is denominated in U.S. dollars. 2012 Expectations: Fitch expects the company to close 2012 with an EBITDA margin of around 23%. The company’s gross leverage is expected to remain stable at around 3.0x and free cash flow (FCF) generation is anticipated to be neutral during 2012, as Grupo Senda should implement its capex plan without increasing current debt levels. Liquidity is expected to remain fragile with significant levels of debt payments scheduled for the next 24 months relative to its cash position. As of June 30, 2012, Group Senda had MXN2,951 million of debt. It generated MXN 898 million of EBITDA during the LTM ended in June. What Could Trigger a Rating Action Analysts Jose Vertiz +1 212 908-0641 jose.vertiz@fitchratings.com Miguel Guzman +011 5281 8399-9100 miguel.guzman@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: The Stable Outlook reflects the view that the wave of violence affecting several Mexican states will not interrupt the stable trend in the company’s operating results in the short and medium term. A negative rating action could be triggered by a combination of the following: deterioration of the company’s credit protection measures due to sizeable negative FCF driven by poor operational results and/or unexpected capex levels funded with short-term debt. Expectations by Fitch of total adjusted debt to EBITDA consistently at 4.5x would likely result in a downgrade. Increasing competition followed by the return to discounted-price practices as a key component of the company’s business strategy to gain market share could also lead to a negative rating action. Conversely, Fitch believes a combination of the following could trigger a positive rating action: improvement in cash flow generation and significantly lower leverage. A permanent improvement in the company’s liquidity position would also be viewed positively. 138 Corporates Recovery Rating Grupo Senda’s recovery ratings reflect Fitch’s belief that the company would be reorganized rather than liquidated in a bankruptcy scenario. In estimating a going-concern value, Fitch applies a valuation multiple of 3.5x to the company’s discounted EBITDA. Fitch also discounts Grupo Senda’s normalized operating EBITDAR by approximately 50%, which reflects the sensitivity of the company’s cash flow generation in a distressed scenario as evidenced during the first half of 2009. After reductions for administrative and cooperative claims, Fitch arrives at an adjusted reorganization value of approximately MXN1.4 billion. Based upon these assumptions, the total senior secured debt of MXN3 billion including the senior secured guaranteed notes, finance leases, and bank loans recovers approximately 48%, resulting in ‘RR4’ ratings for the company’s debt. Recovery Analysis Grupo Senda Autotransporte, S.A. de C.V. (MXN Mil., As of June 30, 2012) Going Concern Enterprise Value EBITDAR Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 898 50 449 3.5 1,571 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 383 60 443 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Distribution of Value Secured Priority Secured 1,571 157 1,414 Lien 2,950 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecured Value Recovered 1,414 Recovery (%) 48 Recovery Rating RR4 Notching 0 Rating B Notching Rating 1,414 1,414 0.0 0.0 0.0 Lien Value Recovered Recovery Concession Allocation Recovery Rating Source: Fitch Ratings. Latin America High Yield November 8, 2012 139 Corporates Organizational Structure — Grupo Senda Autotransporte S.A. de C.V. and Subsidiaries LTM June 2012 Summary Statistics (MXN Mil.) EBITDA 897.68 Cash and Marketable Securities 101.94 Short-Term Debt 416.73 Long-Term Debt 2,533.74 Total Debt 2,950.47 Total Debt/ EBITDA 3.29 GRUPO SENDA USD150 Mil. Senior Secured Guaranteed Notes Due 2015a Transportes Tamaulipas, S.A. de C.V. 98% Servicio Industrial Regiomontano, S.A. de C.V. 98% Transportes del Norte MexicoLaredo Y A.S.I., S.A. de C.V. 98% Servicio Industrial Coahuilense, S.A. de C.V. 98% Autobuses Coahuilenses, S.A. de C.V. 98% Servicios Integrados de Transporte, S.C. 98% 98% Transportes Rodriguez de Saltillo, S.A. de C.V. 98% 90% Senda Servicio Industrial, S.A. de C.V. 98% 98% Transportes Industriales Chihuahuenses, S.A. de C.V. 98% Servicio Industrial Potosino, S.A. de C.V. 98% Transporte Industrial Jalisciense, S.A. de C.V. 98% Multicarga, S.A. de C.V. Servicios T. de N., S.A. de C.V. Servicios Especializados Senda, S.A. de C.V. Domestic Passenger Transportation and Package Delivery Services Turimex del Norte S.A. de C.V. Turimex, LLC 98% 98% Cross-Border Passenger Transportation Services Personnel Transportation Services aEach of Grupo Senda’s subsidiaries guarantees notes jointly and severally on a senior secured basis. Source: Fitch and Grupo Senda Autotransportes S.A. de C.V. and subsidiaries’ (Grupo Senda) financial statements. Latin America High Yield November 8, 2012 140 Corporates Debt and Covenant Synopsis Grupo Senda Autotransporte S.A. de C.V. (Grupo Senda) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Ranking and Collateral Grupo Senda Autotransporte S.A. de C.V. (Grupo Senda) and Subsidiaries Payment of principal of premium, if any, and interest on the notes is guaranteed jointly and severally on a senior secured basis by each of the following Grupo Senda subsidiaries (subsidiary guarantors): Transportes Tamaulipas, S.A. de C.V.; Transportes del Norte México– Laredo y Anexas Servicios Internacionales S.A. de C.V.; Multicarga, S.A. de C.V.; Servicio Industrial Regiomontano, S.A. de C.V.; Servicio Industrial Coahuilense, S.A. de C.V.; Rutas de Saltillo, S.A. de C.V.; Transportes Rodriguez de Saltillo, S.A. de C.V.; Senda Servicio Industrial, S.A. de C.V.; Transportes Industriales Chihuahuenses, S.A. de C.V.; Servicio Industrial Potosino, S.A. de C.V.; Transporte Industrial Jalisciense, S.A. de C.V.; Turimex del Norte, S.A. de C.V.; Turimex LLC, Servicios Integrados de Transporte, S.A. de C.V.; Coach Investments, LLC; Servicios Especializados Senda, S.A. de C.V.; Servicios TDN, S.A. de C.V.; and Autotransportes Adventur, S.A. de C.V. Sept. 26, 2007 Oct. 3, 2015 Senior Secured Guaranteed Notes USD150 Mil. The notes will rank equally with all of the company and the subsidiary guarantors’ existing and future senior secured indebtedness, and senior to all of the company and the subsidiary guarantors’ existing and future subordinated indebtedness. If there are any other nonguarantor subsidiaries in the future, the notes and guarantees will be structurally subordinated to their indebtedness. The notes will be secured on a first-priority basis (subject to certain permitted liens) by liens: 1) on all capital stock held or beneficially owned by Grupo Senda, the subsidiary guarantors, and Autobuses Coahuilenses, S.A. de C.V.; 2) on all of Grupo Senda and the subsidiary guarantors’ inventories and transportation and other equipment; and (3) on all of Grupo Senda and the subsidiary guarantors’ real property, including land and buildings. Under the terms of the indenture governing the notes, Grupo Senda and the subsidiary guarantors may, from time to time after the date of issuance of the notes, grant liens on the collateral to secure additional permitted secured obligations, which may only consist of certain one or more 1) credit facilities to be limited in the aggregate to a principal amount of USD20 million and 2) working capital facilities entered into with one or more Mexican or international financial institutions that are not Grupo Senda’s affiliates at any time prior to or after the date of issuance of the notes and certain trade payables to be limited in the aggregate to a principal amount of USD10 million. Financial Covenants Limitation on Incurrence of Additional Indebtedness Grupo Senda will not, and will not cause or permit any of its restricted subsidiaries to, directly or indirectly, incur any indebtedness, including acquired indebtedness (such acquired indebtedness having not been incurred in connection with, or in anticipation or contemplation of, the relevant acquisition, merger, or consolidation), except that 1) any nonguarantor restricted subsidiary may incur acquired indebtedness (other than acquired indebtedness incurred in connection with, or in contemplation of, the merger with such nonguarantor restricted subsidiary) and 2) Grupo Senda and any subsidiary guarantor may incur indebtedness, including acquired indebtedness, if at the time of and immediately after giving pro forma effect to the incurrence thereof and the application of the proceeds there from, the consolidated leverage ratio of Grupo Senda is not greater than 3.25 to 1:00 and no default or event of default shall have occurred and be continuing at the time such additional indebtedness is incurred. During the third quarter of 2010, the company launched a consent solicitation to amend the covenant under the Indenture restricting the ability of the company to incur additional indebtedness and certain related provisions contained in the indenture. By providing the requisite consents and allowing the company and the other parties thereto to enter into the supplemental indenture, holders agreed to replace the definition of consolidated leverage ratio in the Indenture with a definition of consolidated fixed charge coverage ratio, which is the ratio of consolidated EBITDA to consolidated fixed charges, calculated for four consecutive quarters. The amendments allow the company and any subsidiary guarantor to incur indebtedness if the incurrence of such indebtedness results in a consolidated fixed charge coverage ratio greater than 2.00 to 1.00. Acquisitions/Divestitures Change of Control Provision Upon the occurrence of a change of control, the holders of the notes will have the right subject to certain exceptions to require the issuer to repurchase some or all of the notes at 101% of their principal amount, plus accrued and unpaid interest, if any, on the repurchase date. Certain Covenants The indenture governing the notes contains covenants that limit future actions to be taken, or transactions to be entered into, by Grupo Senda and the restricted subsidiaries. The indenture limits Grupo Senda and the restricted subsidiaries’ ability to, among other things: 1) incur additional indebtedness; 2) pay dividends on Grupo Senda’s capital stock or redeem, 3) repurchase or retire Grupo Senda’s capital stock or subordinated indebtedness; 4) make investments or certain other restricted payments; 5) guarantee debts; 6) create liens; 7) create any consensual limitation on the ability of Grupo Senda’s restricted subsidiaries to pay dividends, 8) make loans or transfer property to us; 9) engage in sale-leaseback transactions; 10) engage in transactions with affiliates; 11) sell assets, including capital stock of Grupo Senda’s subsidiaries; and 12) consolidate, merge or transfer assets. Others Limitation on Transactions with Affiliates Limitation on Consolidations or Mergers Grupo Senda will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, enter into any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, or exchange of any property or the rendering of any service) with, or for the benefit of, any of its affiliates (each an “affiliate transaction”), unless: 1) the terms of such affiliate transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a person that is not an affiliate of the company; 2) in the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD5 million, the terms of such affiliate transaction will be approved by a majority of the members of the board of directors of Grupo Senda; and, 3) in the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD10 million, the company will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such affiliate transaction to Grupo Senda and the relevant restricted subsidiary (if any) from a financial point of view from an independent financial advisor and file the same with the trustee. Grupo Senda will not, in a single transaction or series of related transactions, consolidate or merge with or into any person (whether or not Grupo Senda is the surviving or continuing person), or sell, assign, transfer, lease, convey, or otherwise dispose of (or cause or permit any restricted subsidiary to sell, assign, transfer, lease, convey, or otherwise dispose of) all or substantially all of Grupo Senda’s properties and assets (determined on a consolidated basis for Grupo Senda and its restricted subsidiaries), to any person unless. This restriction is subject to several exceptions. Continued on next page. Source: Grupo Senda and Fitch Ratings. Latin America High Yield November 8, 2012 141 Corporates Debt and Covenant Synopsis Grupo Senda (Continued) (Foreign Currency Notes) Other Events of Default Cross Default Acceleration Governing Law Optional Redemption The main events of default are: 1) default in the payment when due of the principal of or premium, if any, on any notes, including the failure to make a required payment to purchase notes tendered pursuant to an optional redemption, change of control offer, or an asset sale offer; 2) default for 30 days or more in the payment when due of interest, additional amounts or liquidated damages, if any, on any notes; 3) the failure to perform or comply with certain provisions related to mergers, consolidation, and the sale of assets; and 4) the failure by Grupo Senda or any restricted subsidiary to comply with any other covenant or agreement contained in the indenture or in the notes for 30 days or more after written notice to Grupo Senda from the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes. Cross default when an uncured event of default occurs for debt of more than USD10 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. The indenture, the guarantees, and the notes will be governed by the laws of the state of New York. On or prior to Oct. 3, 2011, the notes will be redeemable, at the option of the issuer, in whole or in part, on any interest payment date, at a redemption price equal to the greater of 1) 100% of the principal amount of the notes to be redeemed or 2) the sum of the present values of the remaining scheduled payments of principal and interest on such notes. After Oct. 3, 2011, the notes will be redeemable, at the option of the issuer, in whole or in part, on any redemption date, at the redemption prices (expressed as percentages of their principal amount at maturity 105.25% in 2011, 103.50% in 2012, 101.75% in 2013, and 100% in 2014 and thereafter. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Grupo Senda note documentation and Fitch Ratings. Latin America High Yield November 8, 2012 142 Corporates Financial Summary Grupo Senda Autotransporte, S.A. de C.V. (Grupo Senda) (MXN 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2008 2009 2010 2011 LTM Ended 6/30/12 611,438 611,438 19.72 19.72 12.14 (6.00) (41.00) 527,568 527,568 16.76 16.76 9.94 (6.00) (37.00) 765,133 765,133 21.81 21.81 19.84 7.10 (1.00) 812,577 812,577 22.17 22.17 20.94 (1.00) (55.00) 897,677 897,677 23.72 23.72 21.59 2.32 (32.01) 1.40 1.69 1.69 0.77 0.77 1.40 0.23 0.47 0.43 0.92 1.36 1.36 0.69 0.69 0.92 0.27 0.46 (2.00) 1.77 2.03 2.03 1.02 1.02 1.77 0.84 1.02 4.00 1.91 2.10 2.10 0.92 0.92 1.91 0.39 0.59 0.89 1.94 2.34 2.34 1.12 1.12 1.94 0.59 0.72 1.41 5.96 4.94 4.63 4.94 4.63 13.11 0.14 8.08 5.49 5.21 5.49 5.21 13.13 0.13 4.03 3.52 3.35 3.52 3.35 13.5 0.14 4.25 3.88 3.67 3.88 3.67 13.27 0.16 3.96 3.29 3.17 3.29 3.17 13.61 0.14 4,622,169 191,581 431,846 2,588,235 3,020,081 3,020,081 3,020,081 1,154,169 4,174,250 4,111,073 146,392 375,179 2,521,336 2,896,515 2,896,515 2,896,515 707,812 3,604,327 3,994,662 132,826 370,229 2,326,021 2,696,250 2,696,250 2,696,250 679,173 3,375,423 4,167,989 168,808 495,491 2,653,689 3,149,180 3,149,180 3,149,180 387,965 3,537,145 4,102,580 101,942 416,729 2,533,742 2,950,471 2,950,471 2,950,471 498,438 3,448,909 144,475 (8,228) 136,247 (318,674) (182,427) 39,451 120,618 (22,358) (30,134) (95,165) (125,299) (56,434) (181,733) (13,389) 149,933 (45,189) 291,958 40,091 332,049 (82,993) 249,056 (262,622) (13,566) 352,813 (45,947) 306,866 (346,321) (39,455) 75,437 35,982 361,486 (59,368) 302,118 (214,155) 87,963 (116,960) (28,997) 3,101,126 4.47 277,964 362,445 (552,222) 3,147,789 1.50 161,611 388,463 (343,772) 3,508,730 11.47 432,046 377,634 (6,033) 3,664,654 4.44 482,996 387,851 (290,982) 3,784,747 4.75 568,970 383,186 (189,719) Source: Company reports. Latin America High Yield November 8, 2012 143 Corporates Industrias Metalurgicas Pescarmona S.A.I.C y F. (IMPSA) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B+ B+/RR4 Local Currency Long-Term IDR B+ Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Industrias Metalurgicas Pescarmona S.A.I.C y F. (USD Mil.) Revenue EBITDA Cash Flow from Operations Cash and Marketable Securities Total Recourse Debt Total Recourse Debt/EBITDA (x) Net Recourse Debt/EBITDA (x) 6/30/12 6 Months 451.6 12/31/11 11 Months 1,150.5 107.6 200.0 (143.8) (318.0) 60.8 95.8 957.8 835.4 4.6 3.8 4.3 3.4 Note: IMPSA changed to IFRS in April 2011 and changed the fiscal year end to December. Figures as of December 2011 are 11 months and as of June 2012 are six-month figures. Ratios have been calculated by annualizing income statement and cash flow items of 11months and six months, respectively. Growing Business Presence in Brazil: Industrias Metalurgicas Pescarmona S.A.I.C y F. (IMPSA) is a manufacturing company based in Argentina, with growing operations in Brazil. For the last 11 months ended December 2011, 53% of revenues and 38% of EBITDA came from Brazil. The growth of its business in Brazil has reduced IMPSA’s exposure to more volatile markets such as Argentina and has increased its access to multiple funding sources. This increase in funding sources has reduced concerns about IMPSA’s need to finance its working capital needs in Argentina should trading conditions in that market deteriorate. It has also enabled the company’s foreign currency rating to exceed the ‘B’ country ceiling of Argentina. Positive Business Fundamentals: IMPSA’s ‘B+’ ratings reflect the positive trend for the company’s long-term business fundamentals due to sustained global demand for hydro and wind power generating equipment. As of June 2012, IMPSA’s backlog was USD 3.6 billion with 79% in wind manufacturing, 61% in projects with third parties, and 43% in Brazil. The actual backlog shows an improvement from the USD3.16 billion during January 2011. Given the longterm production cycle of IMPSA’s developments (usually in the range of four years for hydro and 12–18 months for wind farms), this backlog level provides some certainty to the company’s cash generation in the medium term. Backlog Concentration Poses Risk: Backlog concentration for this industry is high, with five projects representing 56% of total backlog at June 2012. The main project in the hydro equipment business unit is the Belo Monte hydro project in Brazil, whereas the main projects in the wind equipment unit are Arauco IV (Argentina) and Ceara III (Brazil). Negative Free Cash Flow: The company’s free cash flow (FCF) is anticipated to remain negative during 2012 and 2013 due to high capital expenditure levels and growing working capital needs. Investments in the construction of wind farms are estimated at approximately USD450 million for fiscal year-end 2012 and USD560 million for fiscal year-end 2013. Much of the cash deficit will be funded with nonrecourse project financing to develop wind farm projects in Brazil. What Could Trigger a Rating Action Changes in Financing Strategy: The company’s ratings could be downgraded or a Negative Outlook could be assigned if recourse financing increases above levels anticipated by Fitch, or if IMPSA changes its existing strategy of financing the development of wind farms with debt from nonrecourse project financing. Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Latin America High Yield November 8, 2012 Operating Issues: Any material performance problems that threaten future projects and cash flow, or a failure to comply with the terms for the operation of the wind farms (for which longterm PPAs have been signed with Eletrobras and the CCEE and are financed by BNDES) could also result in a Negative Outlook or downgrade. A sharp decline in demand for wind farms would also be negative. 144 Corporates Recovery Rating The recovery ratings for IMPSA’s capital market debt instruments reflect Fitch’s expectation that the company’s creditors will anticipate an average recovery of 30%–50%. This recovery level is constrained by the soft cap of ‘RR4’ for bonds issued by corporates domiciled in Argentina. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 4.0x distressed EBITDA multiple, which is slightly below the average ratio observed for many companies involved in diversified manufacturing and capital goods. Recovery Analysis Industrias Metalurgicas Pescarmona S.A.I.C. y F. (USD Mil.) Going Concern Enterprise Value June 2012 annualized EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 215.2 40 129.1 4.0 516.5 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 135.8 — 20.0 155.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 516.5 51.6 464.8 Liquidation Value Cash A/R Inventory Net PPE Total 60.8 51.5 131.9 224.9 469.1 Available to Creditors — 41.2 66.0 45.0 152.1 Advance Rate (%) 0 80 50 20 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims 464.8 — 464.8 Distribution of Value Secured Priority Secured Unsecured Priority Senior Unsecured Lien 0.0 Lien 957.8 Value Recovered — Recovery (%) 0 Value Recovered Recovery (%) 464.8 49 Concession Allocation (%) 100 Recovery Rating — Notching — Rating — Recovery Rating RR4 Notching — Rating B+ Source: Fitch Ratings. Latin America High Yield November 8, 2012 145 Corporates Organizational Structure — Industrias Metalurgica Pescarmona S.A.I.C. Y F. June 2012 Summary Statistics USD107.6 Million of EBITDA (6 Months) USD60.8 Million of Cash and Marketable Securities USD1,343 Million of Total Debt USD958 Million of Total Debt with Recourse 100% Inverall Constr. SA. (Brazil) 55% Energimp (Brazil) Industrias Metalúrgicas Pescarmona S.A.I.C. y F. USD225 Million Senior Unsecured Notes Due 2014 100% Guaranteed WPE (Brazil) 100% Venti Energia (Brazil) 100% WPE International Cooperatief (Netherlands) 45% FI-FGTS Source: Fitch and Industrias Metalúrgicas Pescarmona S.A.I.C. y F. Latin America High Yield November 8, 2012 146 Corporates Debt and Covenant Synopsis Industrias Metalúrgicas Pescarmona S.A.I.C. y F. Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Leverage (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Limitation on Sale of Restricted Subsidiaries Debt Restrictions Additional Debt Restriction Restricted Payments Other Limitation on Liens Transactions with Affiliates Sale and Leaseback Transactions Mergers, Consolidations, Sales, Leases Industrias Metalúrgicas Pescarmona S.A.I.C. y F. N.A. Sept. 7, 2007 2014 Senior Guaranteed Notes N.A. N.A. Change-of-control clause at 101% of principal. The company will not and will not permit any restricted subsidiary to make any asset disposition unless: 1) the consideration received at the time of the sell is equal to the fair value of the shares or assets sold; 2) at least 75% of that consideration is received in the form of cash or temporay cash investments; 3) the company or the restricted subsidiary applies 100% of the net cash proceeds within 360 days to: repay senior debt, reinvest, or purchase additional assets. The company will not and will not permit any restricted subsidiary transfer, convey, lease, sell, or dispose of any voting stock of any restricted subsidiary, except: to the company or to other restricted subsidiary; in compliance with the “Limitation on Sales of Assets” or, “Limitation on Restricted Payments” covenants. The company will not and will not permit any restricted subsidiary to incur any indebtedness. Exceptions are: 1) on the date of such incurrance, the interest coverage ratio would be no less than 2x and total debt to EBITDA no greater than 4x; 2) no default or event of default shall have occurred. This covenant does not prohibit the incurrance of the following debt: 1) intercompany indebtedness within certain restrictions; 2) indebtedness represented by the notes, or outstanding on the issue date, or consisting on refinancing indebtedness; 3) hedging obligations; 4) subordinated indebtedness; 5) debt in an aggregate principal amount not exceeding USD50 million; 6) Short-term debt for the ordinary course of business not exceeding USD40 million during the first year after the issuance, USD20 million prior to the second anniversary and USD10 million thereafter; 7) debt in addition to that referred to in 1 not exceeding USD100 million/USD75 million (year one from covenant changes as of May 2011)/USD50 million (year two)/USD25 million thereafter. The company will not and will not permit any of its restricted subsidiaries to: 1) declare or pay any dividend other than: a) dividends payed in shares of its common stock, b) dividends payed on a pro rata basis of the holders of such common stock; 2) purchase, redeem, or acquire any capital stock of the company or subsidiaries; 3) purchase, redeem, or retire for value, prior to scheduled maturity, any debt which is subordinated to the notes; 4) make any investments other than permitted investments. The company will not and will not permit any of the restricted subsidiaries to assume any lien (except for permitted ones) upon its property, unless at the same time the obligations under the notes are secured equally. The company will not and will not allow its restricted subsidiaries to enter into a transaction with affiliates, unless: 1) the transaction is on terms that are no less favorable than those that would have been obtained in a comparable transaction with a person that is not an affiliate; 2) the company delivers to the trustee: a) for transactions in excess of USD10 million, a resolution from its board of directors, b) for transactions in excess of USD15 million an opinion as to the fairness of that transaction from a financial point of view, issued by an international investment bank. The company or its restricted subsidiaries will not enter into any sale and lease back transactions unless persuant to the provisions of the covenant described under “limitation on Indebtedness.” Not allowed unless: 1) immmediately after giving effect to that transaction no event of default shall have occurred; 2) any corporation formed by such merger is a “sociedad anonima” organized and validly existing, and expressly assumes the debt service of the notes; 3) immideately after that merger the company could inccur in USD1 of additional debt, in line with the “Limitation on Indebtedness” covenant; 4) the successor agrees to indemnify any holder against (i.e. tax issues); 5) within 180 days the credit ratings of the notes shall not be lower as a result of the merger. N.A. – Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Industrias Metalúrgicas Pescarmona S.A.I.C. y F. and Fitch Ratings. Latin America High Yield November 8, 2012 147 Corporates Financial Summary — Industrias Metalurgicas Pescarmona S.A. (USD 000, Fiscal Years Ended Jan. 31 until January 2011; Dec. 31 since December 2011) Period-End Exchange Rate Average Exchange Rate Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Debt with Recourse/EBITDA Net Debt with Recourse/EBITDA Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Debt with Recourse Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.3053 4.4110 4.1295 6 Months 11 Months 6/30/12 12/31/11 3.9787 3.9134 3.8340 3.7990 3.4855 3.1900 3.0905 3.0857 3.1080 3.0752 2011 2010 2009 2008 2007 107,609 24.12 200.048 17.39 183,805 18.10 (10.70) (26.70) 41.70 102,070 16.70 0.20 (4.80) 4.00 107,150 22.40 7.80 (51.30) 7.50 69,288 23.70 4.80 (4.80) 14.90 56,732 21.50 6.00 (14.70) 13.10 0.57 1.60 0.46 0.57 (0.46) (0.33) (1.74) 2.68 0.64 (1.74) (0.94) (0.65) (2.00) 3.20 0.80 (2.00) (0.90) (0.70) (3.20) 0.00 1.60 0.60 0.00 0.20 0.50 (0.70) 1.20 2.30 0.70 1.20 (1.30) (0.70) (6.30) 0.80 2.10 1.40 0.80 0.40 3.40 (1.00) 0.90 2.30 0.40 0.90 (0.10) 0.10 (9.30) 18.06 6.40 6.11 10.13 0.24 4.56 4.27 (8.47) 5.50 5.06 6.79 0.22 3.83 3.39 (7.60) 4.60 4.30 8.00 0.20 3.49 3.20 442.00 5.60 5.00 10.80 0.20 4.30 3.69 10.00 5.40 4.50 9.40 0.20 4.20 2.97 16.40 6.10 4.00 9.40 0.00 5.18 3.03 12.50 5.00 4.50 9.50 0.20 0.40 2,017,386 60,776 324,164 1,019,227 1,343,391 1,343,391 0 1,343,391 957,792 132,297 1,475,687 1,957,000 95,892 258,746 941,875 1,200,621 1,200,621 0 1,200,621 835,446 157,406 1,358,028 1,508,993 53,313 169,816 677,041 846,857 846,857 0 846,857 633,021 180,091 1,026,948 1,004,844 62,417 115,200 461,229 576,429 576,429 0 576,429 438,803 110,700 687,129 909,189 92,969 110,774 464,776 575,550 575,550 0 575,550 411,704 102,638 678,188 754,516 148,688 16,437 407,574 424,011 424,011 0 424,011 358,621 109,349 533,360 531,221 27,791 123,622 158,973 282,595 282,595 0 282,595 89,478 372,073 (29,269) (114,552) (143,820) 0 (33,772) 0 (177,592) 0 (1,824) 146,663 0 (32,752) (204,742) (113,328) (318,070) 0 (48,461) 0 (366,531) 0 (1,644) 415,751 0 47,576 (169,477) (36,434) (205,911) 0 (64,765) 0 (270,676) 0 159 261,562 0 (8,955) (60,750) 48,580 (12,170) 0 (17,051) 0 (29,221) (19,967) 15,631 20,545 0 (13,012) 10,747 (222,510) (211,763) 0 (33,652) 0 (245,414) (8,023) (11,552) 211,685 0 (53,304) (7,493) 373 (7,120) 0 (6,878) 0 (13,998) (35,844) 2,114 170,080 647 122,998 (2,226) (32,640) (34,866) 0 (3,748) 0 (38,614) (11,410) 27 52,403 2,189 4,595 451,599 — 89,913 67,875 0 (13,995) 1,150,532 — 169,350 74,735 0 47,858 1,012,939 65.8 160,540 57,312 0 60,963 610,964 27.7 87,098 62,054 0 4,287 478,472 63.8 94,961 46,959 0 7,916 292,163 10.9 55,074 33,356 0 14,807 263,504 8.9 43,863 24,874 0 10,690 Note: Numbers may not add due to rounding. Source: Industrias Metalúrgicas Pescarmona S.A.I.C. y F. and Fitch. Latin America High Yield November 8, 2012 148 Corporates Financial Summary Industrias Metalurgicas Pescarmona S.A. (ARS 000, Fiscal Years Ended Jan. 31 until January 2011; Dec. 31 since December 2011) 6 Months 11 Months 6/30/12 12/31/11 Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Debt with Recourse/EBITDA Net Debt with Recourse/EBITDA Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Debt with Recourse Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2011 2010 2009 2008 2007 474,664 24.1 861.266 17.4 719,302 18.1 (10.7) (26.7) 41.6 391,337 16.7 0.2 (4.8) 4.2 341,809 22.4 7.8 (51.3) 7.3 213,801 23.7 4.8 (4.8) 14.8 174,461 21.5 6.0 (14.7) 13.0 0.6 1.6 0.5 0.6 (0.5) (0.3) (1.7) 2.7 0.6 (1.7) (0.9) (0.7) (2.0) 3.2 0.8 (2.0) (0.9) (0.7) (3.2) 0.0 1.6 0.6 0.0 0.2 0.5 (0.7) 1.2 2.3 0.6 1.2 (1.2) (0.6) (6.3) 0.8 2.1 1.4 0.8 0.4 3.4 (1.0) 0.9 2.3 0.4 0.9 (0.1) 0.1 (9.3) 18.1 6.4 6.1 10.1 0.2 4.6 4.3 (8.5) 5.5 5.1 8.2 0.2 3.8 3.4 (7.7) 4.7 4.0 7.3 0.2 3.5 3.2 442.0 5.6 4.4 8.0 0.2 4.3 3.7 10.9 5.9 5.0 11.3 0.2 4.2 3.3 16.4 6.1 4.9 9.0 0 5.2 3.0 12.6 5.0 4.0 9.4 0.2 0.4 9,126,251 274,940 1,466,453 4,610,779 6,077,232 6,077,232 0 6,077,232 4,332,860 598,483 6,675,715 8,425,474 412,844 1,113,981 4,055,053 5,169,034 5,169,034 0 5,169,034 3,596,846 677,682 5,846,716 6,003,831 212,117 675,646 2,693,744 3,369,390 3,369,390 0 3,369,390 2,511,827 716,528 4,085,918 3,852,570 239,306 441,677 1,768,353 2,210,030 2,210,030 0 2,210,030 1,682,369 424,423 2,634,453 3,168,977 324,043 386,103 1,619,978 2,006,081 2,006,081 0 2,006,081 1,434,996 357,745 2,363,826 2,331,831 459,520 50,798 1,259,608 1,310,406 1,310,406 0 1,310,406 1,108,319 337,944 1,648,350 1,651,034 86,374 384,216 494,087 878,303 878,303 0 878,303 278,098 1,156,401 (127,564) (881,476) (663,231) (499,263) (487,910) (142,580) (626,827) (1,369,386) (805,811) 0 0 0 (147,190) (208,639) (253,452) 0 0 0 (774,017) (1,578,025) (1,059,263) 0 0 0 (7,948) (7,076) 622 639,217 1,789,931 1,023,596 0 0 0 0 0 0 (142,748) 204,830 (35,045) (232,915) 186,255 (46,660) 0 (65,375) 0 (112,035) (76,554) 59,930 78,770 0 0 (49,889) 34,283 (709,806) (675,523) 0 (107,349) 0 (782,872) (25,592) (36,852) 675,275 0 0 (170,041) (23,120) 1,150 (21,970) 0 (21,224) 0 (43,194) (110,605) 6,524 524,815 0 1,996 379,536 (6,846) (100,375) (107,221) 0 (11,526) 0 (118,747) (35,089) 83 161,151 0 6,732 14,130 2,342,436 53.5 333,935 237,915 0 16,435 1,526,327 69.3 302,925 149,798 0 25,252 901,527 11.3 169,943 102,928 0 45,691 810,326 14.2 134,889 76,492 0 32,873 1,968,2479 — 391,876 295,827 0 (60,995) 4,953,384 — 729,102 321,755 0 206,041 3,964,037 69.2 628,256 224,286 0 238,573 Note: Numbers may not add due to rounding. Source: Industrias Metalúrgicas Pescarmona S.A.I.C. y F. and Fitch. Latin America High Yield November 8, 2012 149 Corporates IRSA Inversiones y Representaciones S.A. Full Rating Report Ratings Key Rating Drivers Foreign Currency Long-Term IDR Senior Unsecured B B+/RR3 Local Currency Long-Term IDR BB– IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data IRSA (USD Mil.) Revenue EBITDA Cash Flow from Operations (CFFO) Cash and Marketable Securities Total Debt Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) CFFO/ Net Debt (x) 6/30/12 364.4 212.0 6/30/11 360.5 190.0 149.4 110.2 84.1 583.9 92.0 593.8 2.8 3.1 2.4 2.6 0.3 0.2 Exposure to Argentina’s Volatile Economy: IRSA Inversiones y Representaciones S.A.’s (IRSA) local currency issuer default rating is constrained at ‘BB–’ by above-average risks associated with real estate development in Argentina. These risks include sharp downturns in economic activity and devaluation risk, as most of its cash flow is denominated in Argentine pesos and a substantial part of its debt is in U.S. dollars. This is partially mitigated by IRSA’s dollar-denominated asset portfolio, investments in assets outside of Argentina, and a long-term debt profile. Transfer and Convertibility Risk: IRSA’s foreign currency issuer default rating (IDR) continues to be constrained at ‘B’ due to the ‘B’ country ceiling assigned to Argentina by Fitch. Timely payment of U.S. dollar debt obligations could be constrained by the imposition of transfer or convertibility (T&C) restrictions in the event of a sovereign stress. The ‘B+/RR3’ rating of the company’s foreign debt obligations reflects Fitch’s opinion that if IRSA missed the timely payment of debt obligations due to government restrictions, lenders would have above-average recovery prospects due to the strong standalone business and financial profile of the company. Rating Linkage to APSA: Despite lower leverage at Alto Palermo S.A. (APSA), the local currency IDR’s of APSA and IRSA have been linked at ‘BB–’. This linkage reflects factors that align the credit quality of the companies, such as strong strategic ties, and the fact that APSA’s upstream dividends represent a relevant part of IRSA’s cash flow generation. Strong Business Position: The company’s ‘BB–’ local currency IDR reflects its strong performance and positive operating trends. IRSA has a leading position in the shopping center segment within the city of Buenos Aires through its subsidiary, APSA (95.6% owned). The shopping centers segment accounted for 75% of its consolidated operating EBITDA. IRSA is also the leader in the development and management of office buildings in Buenos Aires (14% of consolidated operating EBITDA). The balance of IRSA’s operating results is derived from three premium hotels, as well as its residential property development division. Strong Asset Portfolio: The ‘BB–’ local currency IDR rating reflects a moderate level of debt, as well as a manageable liquidity position due to unencumbered assets and land that could be sold. For the real estate industry, the emphasis of Fitch’s methodology is on portfolio quality, diversity, and size. IRSA’s assets portfolio is strong with USD1.2 billion of undepreciated book capital as of June 30, 2012. These assets are mostly unencumbered, as secured debt represents less than 5% of total debt. Leverage, measured by net debt as a percentage of undepreciated book capital, was 40% at June 30, 2012. This percentage would be lower at market values. What Could Trigger a Rating Action Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Aggressive Growth Threatening Capital Structure: The Stable Outlook reflects Fitch’s expectations that IRSA will manage its balance sheet to a targeted total debt-to-EBITDA ratio of less than 3.5x. Any significant increase in IRSA’s targeted leverage ratio would weaken credit quality and could result in a negative rating action. Jose Vertiz +1 212 908-0641 jose.vertiz@fitchratings.com Changes in Argentina’s Country Ceiling: IRSA’s foreign currency IDR could be affected by an upgrade or downgrade of the Argentine country ceiling of ‘B’. Analysts Latin America High Yield November 8, 2012 150 Corporates Recovery Rating The recovery ratings for IRSA’s notes reflect Fitch’s expectation that the company’s creditors would have above-average recovery prospects in the event of a default. The recovery analysis anticipates a 92% recovery for senior unsecured bond holders. The notching was capped at ‘B+/RR3’, which resulted in a one-notch uplift from IRSA’s ‘B’ foreign currency IDR. The notching above the soft cap of ‘RR4’ for bonds issued by Argentine corporates reflects IRSA’s strong credit profile and its ability to continue to operate should a potential economic and/or political crisis occur in Argentina. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 4.0x distressed EBITDA multiple, which is consistent with the value observed in the Buenos Aires stock exchange during the last year. Recovery Analysis IRSA Inversiones y Representaciones S.A. (USD Mil.) Going Concern Enterprise Value June 30, 2012 FYE EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 212 25 159.0 4.0 636.0 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Liquidation Value Cash A/R Inventory Net PPE Total 84.1 66.6 29.2 733.8 913.7 Advance Rate 0 80 50 20 Available to Creditors — 53.3 14.6 146.8 214.6 64.9 — 10.2 75.1 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 636.0 63.6 572.4 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 572.4 — 572.4 28.6 543.8 Distribution of Value Secured Priority Senior Secured Unsecured Priority Senior Unsecured Lien 0.0 Value Recovered — Lien 583.9 Value Recovered 572.4 Recovery (%) 0 Recovery (%) 98 Recovery Rating — Concession Allocation (%) 100 Recovery Ratinga RR3 Notching — Rating — Notching +1 Rating B+ Fitch assigned a ‘B+/RR3’ to IRSA. Note: The ‘RR3’ rating is one-notch higher than the ‘RR4’ soft cap for bonds issued by companies domiciled in Argentina. This is a result of the very strong credit profile of IRSA and the high probability that any default by the company would be related to transfer or convertibility restrictions imposed by the government, not a fundamental weakness in the company’s financial or business profile. Source: Fitch Ratings. Latin America High Yield November 8, 2012 151 Corporates Organizational Structure — IRSA Inversiones y Representaciones S.A. Inversiones y Representaciones S.A. Summary Statistics USD150 Million Notes Due 2017 USD150 Million Notes Due 2020 USD70 Million Notes Due 2013 and 2014 (USD Mil., FYE June 30, 2012) EBITDA Cash and Marketable Securities Total Debt 212 84 584 95.6% 100% Alto Palermo S.A. (APSA) Tyrus S.A. 5.10% 100% 100% 1.42% Palermo Invest RITELCO E-Commerce Latina S.A. Shopping Centers Alto Palermo Paseo Alcorta Alto Avellaneda Abasto Patio Bullrich Alto NOA Alto Rosario Soleil Factory Villa Cabrera Mendoza Shopping 98% Inversora Bolivar REIG 50% 9.88% Baicom 5% HERSHA 5% 5% 100% 30% Liveck Banco Hipotecario 90% Zetol & Vista al Muelle 54% CYRSA Hotels Intercontinental (76.34%) Sheraton Libertador (80%) Llao Llao (50%) Horizons 5% 100% Solares Santa Maria del Plata (100%) Terrenos de Caballito (50%) Puerto Retiro (50%) Canteras Natal Crespo (50%) 29.77% 50% Shopping Center Dot Baires Shopping Office Buildings Land Reserves Metropolitan 885 Third Avenue LLC 80% 50% Residential Apartments IRSA International LLC Shopping Center Neuquen 100% 5.19% 64.01% 100% 100% 5% Banco de Credito y 70% Securitizacion Shopping Center Buenos Aires Design 1.86% 20% Tarshop 80% 95% Apsamedia Others Source: Fitch and Inversiones y Representaciones S.A.’s public information. Latin America High Yield November 8, 2012 152 Corporates Debt and Covenant Synopsis IRSA Inversiones y Representaciones S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Restricted Payments Limitation on Liens Other Non Restricted Subsidiaries Dividends and Payments Affecting Restricted Subsidiaries Limits on Consolidations or Mergers Limits on Guarantees Transactions with Affiliates IRSA Inversiones y Representaciones S.A. N.A. Jan. 11, 2007; program modified on May 7, 2010 2017, 2020; Notes issued under USD400 million program Senior Unsecured Notes N.A. N.A. Change of control clause at 101% of principal. Neither the issuer nor its restricted subsidiaries can sell assets unless: 1) the consideration at the time of such asset sale at least equals the fair market value of those assets or shares sold; 2) at least 75% of the consideration is received in cash or equivalents, or in assets to be used for permitted business. The company or its restricted subsidiaries should apply 85% of the net cash proceeds within 24 months to: 1) repay debt; 2) invest in a permitted business. Neither the issuer nor restricted subsidiaries are allowed to incur additional debt except permitted debt, unless the consolidated interest coverage exceeds 1,75x, and for guaranteed debt, total guaranteed debt at the company and its restricted subsidiaries is below 30% of consolidated tangible assets. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations; guarantees as long as permitted by the “limitation on guarantees”; derivatives as long as used for hedging purposes; debt to finance the acquisition of assets related to the core business of the company, as long as it is below 5% of total consolidated tangible assets; debt related to labor claims; short-term bank debt related to the normal course of business. With several exceptions, the issuer and restricted subsidiaries are prohibited from making certain investments, including the acquisitions of stocks, bonds, and notes under certain conditions. The issuer shall not assume any lien upon its assets (with the exception of “permitted liens”) unless at the same time the obligations of the company under the notes are secured equally. The issuer can designate a subsidiary as “nonrestricted” only when: 1) there is no event of default at the time of designating that subsidiary; 2) at that time, the company can take additional leverage as determined in the “Additional Debt Restriction” of at least USD1.00; 3) at that time the company is allowed to make a permitted investment as defined in the “Restricted Payments” that equals the investment of the company in the designated subsidiary. With several exceptions, the company will not create or allow the existence of any privilege or restriction to the ability of any restricted subsidiary to: 1) paying dividends or debt to the company or any other restricted subsidiary; 2) granting loans to the company or any other restricted subsidiary; 3) transferring any of its assets to the company or any other restricted subsidiary. Restrictions on merger or consolidation of issuer. Exceptions include: 1) the merger of other entities with the issuer provided that surviving entity will be the issuer; 2) if any entity formed by such merger is organized and valid under existing laws, and the surviving entity assumes responsibility towards the debt service of the existing notes. The company will not allow any of its restricted subsidiaries to guarantee IRSA’s debt, unless at the same time they provide the same guarantee to the notes. Transactions with affiliates are permitted as long as: 1) the terms of the transaction are not substantially less favorable than those that could be achieved with a nonrelated party; 2) when total payments involving an affiliate exceed the USD5 million, the terms of that transaction should be approved by the majority of the company's board of directors; 3) when total payments involving an affiliate exceed the USD20 million, an independent financial advisor will have to analyze the rational of such transaction and present his opinion to the trustee. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: IRSA’s public information and Fitch Ratings. Latin America High Yield November 8, 2012 153 Corporates Financial Summary — IRSA Inversiones y Representaciones S.A. Period-End Exchange Rate 4.5238 4.1100 3.9317 3.7925 3.0235 3.0905 Average Exchange Rate 4.3012 3.9998 3.8458 3.4096 3.1247 3.0861 2012 2011 2010 2009 2008 2007 211,998 58.2 14.9 15.8 10.2 190,043 52.7 14.0 7.3 9.8 184,591 53.0 10.7 0.9 12.3 126,914 35.4 13.4 (5.6) 6.4 119,748 34.5 12.0 (44.3) 2.4 94,297 39.4 6.3 (37.8) 5.3 3.2 (USD 000, Fiscal Year Ended June 30) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage 2.8 3.2 3.4 3.9 4.4 Operating EBITDA/Gross Interest Expense 3.3 3.3 4.8 3.2 3.7 4.4 Operating EBITDA/Debt Service Coverage 1.1 0.8 0.9 1.0 1.3 1.0 FFO Fixed-Charge Coverage 2.8 3.2 3.4 3.9 4.4 3.2 FCF Debt Service Coverage 0.6 0.4 0.2 0.1 (1.3) (0.8) (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage 1.1 4.8 0.8 5.0 0.7 1.4 0.7 0.9 0.1 0.4 1.8 0.4 3.2 3.2 3.2 2.3 3.0 6.2 Total Debt with Equity Credit/Operating EBITDA 2.8 3.1 2.3 2.8 3.5 4.6 Total Net Debt with Equity Credit/Operating EBITDA 2.4 2.6 1.8 2.2 2.4 2.1 Implied Cost of Funds 11.0 11.4 9.8 9.9 7.1 7.1 Secured Debt/Total Debt 0.0 0.0 0.0 0.0 0.0 0.1 Short-Term Debt/Total Debt 0.2 0.3 0.4 0.3 0.1 0.1 1,459,075 84,142 127,257 456,657 1,536,572 92,057 166,378 427,474 1,444,472 85,865 156,203 264,494 1,298,944 68,020 92,414 274,928 Total Debt Equity Credit 583,915 — 593,852 — 420,697 — 367,342 16,164 433,742 15,497 464,849 34,422 Total Debt with Equity Credit 583,915 593,852 420,697 351,178 418,245 430,427 0 0 0 0 0 0 583,915 593,852 420,697 351,178 418,245 430,427 787,463 678,571 Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital 596,447 680,935 760,552 673,696 1,180,362 1,274,787 1,181,249 1,024,874 1,479,071 1,341,174 134,745 229,258 62,892 69,307 370,850 395,542 1,205,708 1,108,998 Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow 119,602 125,956 91,797 113,401 108,190 29,809 (15,713) (29,740) (25,374) (13,448) 48,189 4,661 149,410 110,243 62,057 88,027 94,742 52,850 0 0 0 0 0 0 Capital Expenditures (31,084) (21,957) (44,332) (101,356) Dividends (60,583) (61,987) (14,575) (6,924) (7,787) (7,509) 57,744 26,300 3,151 (20,253) (153,888) (90,552) (28,321) Free Cash Flow (240,843) (135,892) Net Acquisitions and Divestitures (39,220) 0 0 0 (5,164) Other Investments, Net (26,098) (167,343) (79,406) (29,072) 1,278 (1,295) Net Debt Proceeds Net Equity Proceeds (10,705) 13,118 181,073 202 54,990 12,163 (24,528) 0 (7,192) 52,298 288,220 8,411 Other, Financing Activities (1,612) 0 0 14,129 10,412 0 Total Change in Cash (6,773) 40,232 (9,102) (59,724) (102,256) 176,463 364,375 360,501 348,244 358,995 346,991 239,382 1.1 3.5 6.4 3.5 45.0 24.3 170,741 146,358 142,034 86,975 81,557 62,445 Gross Interest Expense 64,886 57,706 38,527 39,764 32,036 21,594 Net Income 65,117 70,530 88,027 46,657 17,562 34,703 Income Statement Net Revenue Revenue Growth (%) Operating EBIT Source: Fitch and IRSA Inversiones y Representaciones S.A.’s public information. Latin America High Yield November 8, 2012 154 Corporates Financial Summary — IRSA Inversiones y Representaciones S.A. (ARS 000, Fiscal Year Ended June 30) 2012 2011 2010 2009 2008 2007 Profitability Operating EBITDA 911,844 760,133 701,446 431,507 374,177 291,009 Operating EBITDA Margin (%) 58.2 52.7 53.0 35.4 34.5 39.4 FFO Return on Adjusted Capital (%) 14.9 14.0 10.9 13.4 12.0 6.3 Free Cash Flow Margin (%) 15.8 7.3 0.9 (5.6) (44.3) (37.8) Return on Average Equity (%) 10.2 9.8 12.1 6.4 2.5 5.3 Coverage (x) FFO Interest Coverage 2.8 3.2 3.4 3.9 4.4 3.2 Operating EBITDA/Gross Interest Expense 3.3 3.3 4.8 3.2 3.7 4.4 Operating EBITDA/Debt Service Coverage 1.1 0.8 0.9 0.9 1.3 1.0 FFO Fixed-Charge Coverage 2.8 3.2 3.4 3.9 4.4 3.2 FCF Debt-Service Coverage 0.6 0.4 0.2 0.1 (1.3) (0.8) (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage 1.1 0.8 0.7 0.7 0.1 1.8 Cash Flow from Operations/Capital Expenditures 4.8 5.0 1.4 0.9 0.4 0.4 FFO Adjusted Leverage 3.3 3.3 3.2 2.6 2.9 6.2 Total Debt with Equity Credit/Operating EBITDA 2.9 3.2 2.2 3.1 3.4 4.6 Total Net Debt with Equity Credit/Operating EBITDA 2.5 2.7 1.8 2.5 2.3 2.1 11.0 11.3 9.6 10 7.3 7.1 — — — — 0.0 0.1 0.3 0.3 0.4 0.3 0.1 0.1 Capital Structure and Leverage (x) Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets 6,600,565 6,315,310 5,633,441 4,935,987 4,471,972 4,144,899 Cash and Marketable Securities 380,640 378,353 334,872 258,475 407,403 708,523 Short-Term Debt 575,687 683,813 609,190 351,173 190,153 214,193 Long-Term Debt 2,065,826 1,756,919 1,031,528 1,044,725 1,121,264 1,222,423 Total Debt 2,641,513 2,440,732 1,640,718 1,395,898 1,311,417 1,436,616 — — 63,609 61,424 46,856 106,382 2,641,513 2,440,732 1,577,109 1,334,474 1,264,561 1,330,234 Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit 0 0 0 0 0 0 2,641,513 2,440,732 1,577,109 1,334,474 1,264,561 1,330,234 Total Equity 2,698,208 2,798,641 2,966,153 2,560,043 2,380,893 2,097,124 Total Adjusted Capital Cash Flow 5,339,721 5,239,373 4,543,262 3,894,517 3,645,454 3,427,358 148,716 Funds from Operations 514,431 503,800 348,830 385,563 338,062 Change in Working Capital 128,213 (62,849) (113,013) (86,270) (42,021) 14,383 Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow 642,644 0 440,951 0 235,817 0 299,293 0 296,041 0 163,099 0 Capital Expenditures Dividends Free Cash Flow (133,698) (260,578) 248,368 (87,822) (247,934) 105,195 (168,460) (55,385) 11,972 (344,611) (23,541) (68,859) (752,562) (24,332) (480,853) (419,377) (23,175) (279,453) Net Acquisitions and Divestitures (168,695) 0 0 0 (16,137) (87,402) Other Investments, Net (112,252) (669,339) (301,742) (98,846) 3,994 (3,995) (46,044) 724,256 208,962 (83,395) (22,473) 889,475 Net Equity Proceeds 56,424 808 46,220 0 163,416 25,958 Other, Financing Activities (6,935) 0 0 48,038 32,534 0 (29,134) 160,920 (34,588) (203,062) (319,519) 544,583 1,567,251 1,441,930 1,323,326 1,220,584 1,084,242 738,756 8.7 9.0 8.4 12.6 46.8 27.9 Operating EBIT 734,390 585,401 539,731 295,716 254,842 192,710 Gross Interest Expense 279,086 230,811 146,402 135,196 100,104 66,642 0 0 0 0 0 0 280,081 282,104 334,501 158,635 54,875 107,097 Net Debt Proceeds Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Rental Expense Net Income Source: Fitch and IRSA Inversiones y Representaciones S.A.’s public information. Latin America High Yield November 8, 2012 155 Corporates Maestro Peru S.A. (Maestro) Full Rating Report Ratings Key Rating Drivers Foreign Currency Long-Term IDR B+ Senior Secured BB–/RR3 Local Currency Long-Term IDR B+ Positive Macro and Business Environment: The Peruvian economy is forecasted to post growth rates of 5.8% and 6.2% during 2012 and 2013, respectively, after growing 6.9% in 2011. Maestro is expected to continue to benefit from the solid industry fundamentals of Peru’s home improvement industry as a result of the country’s positive macroeconomic environment, which is increasing purchasing power of households. Low penetration levels also bode well for the industry and Maestro. IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable Financial Data Maestro (PEN Mil.) Revenues EBITDAR EBITDAR Margin (%) CFFO Capex FCF FCF Margin (%) Cash Short-Term Debt Total On-Balance Debt Total Off-Balance Debt Total Adjusted Debt Total Adjusted Debt/ EBITDAR (x) EBITDAR/(Interest Expense + Rents) Cash as % of Revenues Cash/Revenues (Days) Leader Local Player: Maestro Peru S.A. (Maestro) is one of the two largest modern home improvement retailers in Peru. It has an estimated market share of 43%. The company maintains an established and recognized brand and is well positioned as a low-price specialist. 6/30/12 12/31/11 1,128 1,019 113 103 10.0 10.1 28 36 155 157 (127) (121) (11.3) (11.9) 16 16 172 125 326 298 76 402 80 378 3.6 3.7 3.3 3.7 1.4 1.5 5 6 Liquidity to Improve Post Issuance: The company is expected to gain financial flexibility with the proposed transaction by improving its debt payment schedule and rebuilding its cash position. The company’s liquidity has been relatively weak in the past as the company funded its negative free cash flow from heavy investments with short-term debt. High Leverage: Maestro’s FCF is expected to remain negative driven by its capex plan. The ratings incorporate an expected increase in the company’s gross leverage from 3.6x as of June 30, 2012. Pro forma the transaction amount, which is expected to be up to USD180 million, Maestro’s leverage will increase to 5.5x. Limited Diversification and Cyclicality Incorporated: Maestro has limited business and geographic diversification as the company’s operations are concentrated in one retail business format in Peru. Competition in the market is increasing, but penetration levels remain low. The ratings also consider the sensitivity of the construction and home improvements industry to economic cycles. What Could Trigger a Rating Action Key Rating Drivers: Key rating drivers include the development of the Peruvian macroeconomic environment, the company’s margins, leverage, liquidity, and FCF trends. The balance between organic and inorganic growth will also affect credit quality. The Stable Outlook reflects Fitch Ratings’ expectation that Maestro will continue to deliver positive operating results based on its solid market position and continued favorable trend for Peru’s home improvement industry during the next few years. Maestro is expected to complete its capex plans as scheduled between 2012 and 2014 without a further increase in leverage (post issuance). Analysts Jose Vertiz +1 212 908-0641 jose.vertiz@fitchratings.com Josseline Jenssen +591 2 277-4470 josselne.jenssen@fitchratings.com Latin America High Yield November 8, 2012 A negative rating action could be triggered by a deterioration of the company’s credit protection measures due to sizeable negative FCF levels that would require incremental debt. A weakening of liquidity and an increase in short-term debt would also be seen as negative to credit quality. An upgrade is not likely until the company completes its capex plan, reverses its cash flow trends, and lowers leverage, which is not expected to occur during the next 12-month period ended in September 2013. 156 Corporates Recovery Rating Maestro’s recovery ratings reflect Fitch’s belief that the company would be reorganized rather than liquidated in a bankruptcy scenario. In estimating a going-concern value, Fitch applies a valuation multiple of 5x to the company’s discounted EBITDA. Fitch also discounts Maestro’s normalized operating EBITDA by approximately 24%, which would reflect the sensitivity of the company’s cash flow generation in a distressed scenario. After reductions for administrative and cooperative claims, Fitch arrives at an adjusted reorganization value of approximately MXN350 million. Based upon these assumptions, the total senior unsecured debt of MXN534 million recovers approximately 66%, resulting in ‘RR3’ ratings for the company’s debt. The ‘BB–/RR3’ ratings on the company’s unsecured senior notes debt reflect good recovery prospects that are anticipated to be in the range of 50%–70% in the event of a default. Recovery Analysis Maestro Peru S.A. (PEN Mil., As of June 30, 2012) Going Concern Enterprise Value EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 101,616 24 77,865 5.0 389,325 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 45,795 18,670 13,400 77,865 389,325 38,933 350,392 Distribution of Value Unsecured Priority Senior Unsecured (Pro Forma Debt) Lien 534,000 Value Recovered 350,392 Recovery (%) 66 Concession Allocation Recovery Rating RR3 Notching +1 Rating BB– Source: Fitch Ratings. Latin America High Yield November 8, 2012 157 Corporates Organizational Structure — Maestro Peru S.A. (As of LTM June 30, 2012) ENFOCA Inversiones S.A. 91.85% Maestro Peru S.A. Sales: PEN1,128 Mil. EBITDA: PEN102 Mil. Total Debt: PEN326 Mil. TD/EBITDA (x): 3.2 ATD/EBITDAR (x): 3.6 99% 99.00% Inmobialiaria Domel 99.00% Industrias Delta TD –Total debt. ATD – Total adjusted debt . Source: Company and subsidiaries’ financial statements and Fitch. Latin America High Yield November 8, 2012 158 Corporates Financial Summary Maestro Peru S.A. (Maestro) (PEN 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 101,606 112,493 0.09 0.10 0.15 (0.11) 0.19 91,345 102,824 0.09 0.10 0.15 (0.12) 0.19 71,375 81,798 0.09 0.10 0.19 (0.01) 0.20 54,752 64,522 0.08 0.10 0.15 (0.02) 0.18 42,272 52,013 0.07 0.09 0.13 (0.15) 0.31 3.90 4.45 3.33 0.52 0.55 2.97 (0.54) (0.46) 0.18 4.91 5.53 3.67 0.65 0.67 3.31 (0.74) (0.63) 0.23 5.75 5.69 3.56 1.08 1.07 3.59 0.10 0.34 0.99 2.71 3.28 2.44 0.54 0.58 2.08 0.01 0.12 0.71 2.40 3.62 2.43 0.46 0.52 1.76 (0.82) (0.71) 0.12 4.02 3.20 3.05 3.57 3.43 0.09 — 0.53 4.09 3.26 3.09 3.68 3.53 0.07 — 0.42 2.75 2.16 1.94 2.77 2.58 0.08 — 0.35 4.05 2.82 2.61 3.45 3.27 0.11 — 0.55 5.83 3.60 3.35 4.24 4.04 0.15 — 0.52 843,394 15,640 171,737 153,803 325,540 — 325,540 76,209 401,749 264,948 666,697 823,004 15,837 124,577 173,488 298,065 — 298,065 80,353 378,418 244,125 622,543 572,058 15,703 53,752 100,207 153,959 — 153,959 72,961 226,920 201,949 428,869 443,636 11,591 84,633 69,813 154,446 — 154,446 68,390 222,836 133,519 356,355 356,088 10,378 79,330 72,772 152,102 — 152,102 68,187 220,289 79,216 299,505 66,313 (38,376) 27,937 — (155,101) — (127,164) 10,264 (3,653) 142,691 — (15,618) 6,520 64,570 (28,605) 35,965 — (157,332) — (121,367) — (6,108) 143,227 — (15,618) 134 59,561 (3,573) 55,988 — (56,605) (5,406) (6,023) 20,201 (1,134) 1,219 — (10,151) 4,112 28,586 10,649 39,235 — (55,073) — (15,838) 17,329 (2,622) 2,344 — 16,350 (5,035) 11,315 — (97,537) — (86,222) 24,601 (13,689) 76,091 — 1,213 781 1,128,380 — 88,871 22,847 10,887 45,082 1,019,425 0.28 79,025 16,521 11,479 42,176 797,629 0.21 60,732 12,544 10,423 32,857 659,264 0.15 43,843 16,708 9,770 18,716 575,652 — 35,084 11,663 9,741 12,287 Source: Company reports. Latin America High Yield November 8, 2012 159 Corporates Marfrig Alimentos S.A. Full Rating Report Ratings Key Rating Drivers Foreign Currency Long-Term IDR Senior Unsecured B+ B+ Local Currency Long-Term IDR B+ National Long-Term Rating BBB+ High Leverage: Marfrig Alimentos S.A.’s (Marfrig) gross and net debt-to-LTM EBITDA ratios were 6.1x and 4.6x, respectively, as of June 30, 2012. This compares to 6.8x and 4.8x, respectively, in 2011. Fitch Ratings expects that Marfrig’s leverage ratios will remain high and relatively unchanged at the end of the year. Ratings Outlooks Foreign Currency Long-Term Rating Negative Local Currency Long-Term Rating Negative National Long-Term Rating Negative Financial Data Marfrig Alimentos S.A (BRL 000) 6/30/12 12/31/11 Revenue Operating EBITDAR Cash Flow from Operations Free Cash Flow Cash and Marketable Securities Total Adjusted Debt/Operating EBITDAR (x) Net Adjusted Debt/Operating EBITDAR (x) 22,361 2,030 21,885 1,774 1,939 1,111 1,502 528 3,028 3,477 6.1 6.8 4.6 4.8 Weak Free Cash Flow Leads to a Negative Outlook: Cash flow generation has been negative during the past six years, with the exception of 2011. While the first half of 2012 showed an improvement in cash flow, Fitch is concerned that the recent rise in grain prices will pressure Marfrig’s profitability and reduce cash flow generation in the latter part of 2012 and through 2013, resulting in free cash flow that is neutral to negative, which inhibits the company’s ability to deleverage. Earnings Volatility: Protein prices and demand are volatile. Marfrig’s profit margins are affected by factors beyond the company’s control. These include domestic and international supply and demand imbalances resulting from animal disease and weather conditions, global economic growth, changes in consumption habits, and government-imposed sanitary and trade restrictions. Competitive pressures from other players also affect the company’s margins. Strong Business Position: Marfrig is one of Brazil’s largest producers and exporters of beef, poultry, and pork. The company has a more diversified business profile than most of its peers. Its production base is diversified and 35% of its sales are from exports. A little over one-third of its revenues come from higher value-added processed food. As a result of the recent asset swap with Brazil Foods (BRF), processed and prepared product capacities will more than double. Processed Food — Long Term Positive, Short Term Volatility: Marfrig’s strategy of reducing commodity protein exposure by increasing its share in processed food, which is less volatile and commands better profit margins, is a credit positive. The asset swap with BRF will strengthen Marfrig’s competitive position in the value-added protein products market and is consistent with the company’s previous acquisitions. Achieving full capacity will take time and the company’s efficiency may decline during the integration period which will pressure margins. Analysts Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Gisele Paolino +55 21 4503-2624 gisele.paolino@fitchratings.com Joseph N. Bormann, CFA +1 312 368-3349 joe.bormann@fitchratings.com Latin America High Yield November 8, 2012 Ratings Are Linked: Fitch has linked the ‘B+’ ratings of Marfrig Overseas and Marfrig Holdings B.V. to those of Marfrig Alimentos S.A. through its parent and subsidiary rating methodology. Marfrig Alimentos S.A. guarantees the U.S. dollar notes that have been issued by both of these subsidiaries. What Could Trigger a Rating Action Weakening Credit Profile: A rating downgrade could be triggered by one, or a combination of the following: deteriorating credit metrics, negative cash flow generation, and tight liquidity. A revision of the Outlook to Stable could be triggered by a number of factors that could include financial improvements better than expected given the current operating environment and/or capital injections to repay debt. 160 Corporates Recovery Worksheet Marfrig’s recovery rating of ‘RR4’ indicates that the company’s creditors would have average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. Fitch has performed a liquidation analysis in the event of bankruptcy. Fitch has also estimated the enterprise valuation in the event of financial distress. This analysis considers that any debt default by Marfrig would likely be the result of a sudden deterioration in the business environment either by import ban on Brazilian meat due to health considerations by a considerable number of export countries, or by a sharp reduction in meat consumption due to economic distress abroad. It also considers that company operations will remain valuable, but at a relatively low multiple of 5x. The bespoke Marfrig recovery analysis suggests a higher recovery level for the senior unsecured debt that would be consistent with very high recovery levels. Fitch has capped the company’s recovery at RR4 due to concerns about recovery prospects for companies domiciled in Brazil. Recovery Analysis Marfrig Alimentos S.A. (BRL Mil.) IDR: B+ Going Concern Enterprise Value June 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 2,030.1 25 1,522.6 5.0 7,612.9 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 3,028.4 1,105.6 2,414.9 7,618.3 14,167.1 Advance Rate (%) 0 80 50 25 Available to Creditors 884.5 1,207.4 1,904.6 3,996.5 (1,300.0) (300.0) (1,600.0) Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 7,612.9 761.3 6,851.6 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims 6,851.6 544.8 6,306.8 Distribution of Value Secured Priority Senior Secured Secured Unsecured Priority Senior Unsecured Unsecured Convertible Debentures Junior Subordinated Lien 0.0 544.8 Lien 3,193.0 7,157.4 594.0 0.0 Value Recovered 544.8 Value Recovered 3,193.0 2,798.5 Recovery (%) 0 100 Recovery (%) 100 39 0 0 Recovery Rating Notching — RR1 +3 Concession Allocation (%) 100 0 0 0 Recovery Rating RR1 RR4 RR6 Notching +3 0 2 Rating BB+ Rating BB+ B+ B Source: Fitch. Latin America High Yield November 8, 2012 161 Corporates Organizational Structure — Marfrig Alimentos S.A. (BRL Mil., As of June 30, 2012) Marfrig Alimentos S.A. (Consolidated — No Debt or EBITDA on HoldCo Level) Total Debt % of Total Debt Cash + Fin. Inv. Net Debt Pf EBITDA ND/EBITDA Seara Foods Total Debt % of Total Debt Cash + Fin. Inv. Net Debt Pf EBITDA ND/EBITDA USD750 Mil. Sr. Notes due 2018 Marfrig Beef 3,767 32 713.7 3,053 1,517 2.0 Marfrig Hold (Eur) BV Total Debt % of Total Debt Moy Park Total Debt % of Total Debt Cash + Fin. Inv. Net Debt Pf EBITDA ND/EBITDA Nova Seara (BR) 2,342a 23 Keystone Foods 11,752 100 3,028 8,724 2,456 3.6 Total Debt % of Total Debt Seara Holdings Eur BV 1,425 9 USD375 Mil. Sr. Notes due 2016 USD500 Mil. Sr. Notes due 2020 Marfrig Overseas Ltd . 6,244a 58 1,175 5,069 939 5.4 Total Debt % of Total Debt Cash + Fin. Inv. Net Debt Pf EBITDA ND/EBITDA 1,742a 5 1,139 602 0 N.A. BRL300 Debentures 1st Tranche (IPCA) BRL300 Debentures 2nd Tranche (CDI) Secculum Unifred Athena aPrincipal + accrued interests. ND – Net debt. Pf – Pro forma. Source: Marfrig Alimentos S.A. Latin America High Yield November 8, 2012 162 Corporates Debt and Covenant Synopsis Marfrig Alimentos S.A. Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Ranking Marfrig Overseas Limited Marfrig Frigoríficos e Comércio de Alimentos Ltda. Nov. 16, 2006 Nov. 16, 2016 Senior Guaranteed Notes USD375 Million The issuance is unconditionally and irrevocably guaranteed by Marfrig and ranks equally with Marfrig’s senior unsecured indebtedness. Marfrig Overseas Limited Marfrig Alimentos S.A. April 29, 2010 April 29, 2020 Senior Guaranteed Notes USD500 Million The issuance is unconditionally and irrevocably guaranteed by Marfrig and ranks equally with Marfrig’s senior unsecured indebtedness. Marfrig Holdings (Europe) B.V. Marfrig Alimentos S.A. May 4, 2011 May 4, 2018 Senior Guaranteed Notes USD750 Million Unconditionally and irrevocably guaranteed by Marfrig Alimentos S.A. and certain of its subsidiaries. Financial Covenants Net Adjusted Debt/ Pro Forma EBITDA Less than 4.75x Less than 4.75x Less than 4.75x Limitations on The company will not: declare or pay any dividend, purchase or redeem any subordinated obligation prior to the scheduled maturity, or make any Restricted Payments investment if 1) an event of default has occurred; 2) and the net debt-to-EBITDA ratio is greater than 4.75x. Acquisitions/Divestitures Change-of-Control If a change of control occurs, each holder of notes will have the right to If a change of control occurs, each holder of notes will have the right to Provision require Marfrig Overseas and the company to repurchase all or any part require Marfrig Holdings (Europe) B.V. and the company to repurchase of that holder’s notes pursuant to a change of control offer. In the all or any part of that holder’s notes pursuant to a change of control change of control offer, Marfrig Overseas and the company will offer a offer. In the change of control offer, Marfrig Holdings (Europe) B.V. and “change-of-control payment” in U.S. dollars equal to 101% of the the company will offer a “change-of-control payment” in U.S. dollars aggregate principal amount of notes repurchased plus accrued and equal to 101% of the aggregate principal amount of notes repurchased unpaid interest and additional amounts, if any, on the notes plus accrued and unpaid interest and additional amounts, if any, on the repurchased, to the date of purchase. notes repurchased, to the date of purchase. Other Limitations on Sales of The company will not make any asset disposition unless the following conditions are met: the asset disposition is for fair market value; at least Assets 75% of the consideration consists of cash and temporary cash investments or additional assets; within 360 days after the receipt of any net available cash from the sale, the net available cash may be used: to permanently repay indebtedness, to acquire all or substantially all of the assets of a related business or to acquire additional assets for the company. The net available cash of an asset disposition not applied to the aforementioned within 360 days shall constitute “excess proceeds.” Excess proceeds of less than USD20 million shall be carried forward and accumulated. When accumulated excess proceeds equal or exceed USD20 million, the company must, within 30 days, make an offer to purchase notes, at purchase price and in U.S dollars, of 100% of their principal amount plus accrued and unpaid interest thereon, to the date of purchase. Optional Redemption The notes may be redeemed at Marfrig Overseas’s election, as a whole, but not in part, by the giving of notice as provided in the indenture, at a price in U.S. dollars equal to the outstanding principal amount thereof, together with any additional amounts and accrued and unpaid interest to the redemption date. Prior to May 4, 2013, Marfrig Overseas may, at its option on one or more occasions, redeem notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the notes originally issued prior to the redemption date at a redemption price of 109.50%, plus accrued and unpaid interest to the redemption date. Prior to May 4, 2015, Marfrig Overseas will also be entitled at its option to redeem some or all of the notes at a redemption price equal to 100% of the principal amount of the notes plus the applicable premium as of, and accrued and unpaid interest to, the redemption date. On and after May 4, 2015, Marfrig Overseas will be entitled at its option to redeem all or a portion of the notes upon not less than 30 nor more than 60 days’ notice, at the redemption price (plus accrued interest to the redemption date, if redeemed during the 12-month period commencing on May 4 of the years ended Sept. 30: 2015, 104.750%; 2016, 103.167%; 2017, 101.583%; and 2018 and thereafter, 100%. Some or all of the notes at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest, if any, plus the “make-whole” premium. Up to 35% of the notes with the net proceeds of certain equity offerings at a redemption price equal to 108.375% of the principal amount of the notes plus accrued and unpaid interest to the date of redemption. The redemption can be made only if, after the redemption, at least 65% of the aggregate principal amount of notes issued under the indenture remains outstanding. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Marfrig Alimentos S.A. and Marfrig Holdings (Europe) B.V. offering memorandums and Fitch Ratings. Latin America High Yield November 8, 2012 163 Corporates Financial Summary Marfrig Alimentos S.A. (BRL 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) LTM 6/30/12 2011 2010 2009 2008 2,030,090 2,030,090 9.08 9.08 20.09 4.97 (10.00) 1,773,804 1,773,804 8.11 8.11 18.29 2.41 (12.00) 1,502,466 1,502,466 9.46 9.46 8.00 (7.00) 2.62 819,536 819,536 8.52 8.52 8.15 (4.00) 19.55 753,254 762,158 12.14 12.29 5.96 (20.00) (2.00) 1.82 1.00 1.00 0.37 0.37 1.82 0.58 1.13 2.38 1.70 0.92 0.92 0.38 0.38 1.70 0.52 1.26 1.65 1.03 1.16 1.16 0.33 0.33 1.03 0.03 0.89 0.06 1.29 1.32 1.32 0.36 0.36 1.29 0.09 1.43 0.23 1.01 1.67 1.66 0.43 0.43 1.01 — 0.18 (2.00) 3.37 6.11 4.62 6.11 4.62 17.39 — 0.28 3.66 6.75 4.78 6.75 4.78 17.38 — 0.23 7.64 6.79 4.21 6.79 4.21 16.33 — 0.32 7.04 6.91 3.20 6.91 3.2 12.22 — 0.29 10.89 6.01 4.59 6.67 5.26 13.14 — 0.29 Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital 23,511,109 3,028,383 3,431,731 8,980,556 12,412,287 — 12,412,287 — 12,412,287 5,946,442 18,358,729 23,823,441 3,476,960 2,771,104 9,193,354 11,964,458 — 11,964,458 — 11,964,458 5,898,521 17,862,979 22,599,586 3,876,356 3,221,873 6,985,898 10,207,771 — 10,207,771 — 10,207,771 6,496,413 16,704,184 11,451,641 3,033,438 1,639,848 4,019,232 5,659,080 — 5,659,080 — 5,659,080 4,197,808 9,856,888 9,155,171 1,071,664 1,306,339 3,223,491 4,529,830 — 4,529,830 553,710 5,083,540 2,747,768 7,831,308 Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash 1,656,568 282,721 1,939,289 — (813,265) (14,900) 1,111,124 — 500,570 (1,783,889) (14,486) (151,874) (338,555) 1,340,774 161,541 1,502,315 — (912,820) (61,936) 527,559 — (33,795) (72,164) (6,758) (76,070) 338,772 40,697 23,857 64,554 — (1,119,059) (99,350) (1,153,855) — (2,830,478) 4,844,826 (3,357) (20,219) 836,917 181,343 (60,334) 121,009 — (535,483) — (414,474) (190,346) (5,319) 1,173,271 1,466,549 (67,907) 1,961,774 6,446 (734,903) (728,457) — (485,091) — (1,213,548) (1,477,692) (43,831) 1,341,916 1,359,120 55,893 21,858 Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 22,361,458 13.67 1,564,590 2,031,917 — (628,649) 21,884,909 37.83 1,032,276 1,927,054 — (746,012) 15,878,469 65.13 875,742 1,295,787 — 140,092 9,615,740 55.00 545,080 622,427 — 679,079 6,203,797 85.75 724,586 451,542 8,904 (35,500) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Source: Company reports. Latin America High Yield November 8, 2012 164 Corporates Minerva S.A. Minerva Luxembourg Ltd. Full Rating Report Key Rating Drivers Ratings Minerva, Minerva Overseas Ltd. and Minerva Overseas II Ltd. Foreign Currency Long-Term IDR Senior Unsecured B+ B+/RR4 Local Currency Long-Term IDR Senior Unsecured B+ BBB(bra) Minerva National Long-Term Rating IDR – Issuer default rating. BBB(bra) Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Financial Data Minerva S.A. (BRL Mil.) Revenue EBITDA Cash Flow from Operations FCF Cash and Marketable Securities Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) 3/30/12 4,041 372 12/31/11 3,977 328 98 (76) (11) (183) 846 746 6.3 6.4 4.0 4.1 Strong Business Position: Minerva S.A. (Minerva) is the third-largest Brazilian exporter of fresh and frozen beef. It has a low-cost structure, and a diversified and flexible export revenue base. The successful execution of its strategic plan, including an equity issuance during the challenging operating environment of the last few years, further supports Minerva’s ratings. Volatility of Earnings: Protein prices and demand are volatile by nature. Minerva’s profit margins are affected by factors beyond the company’s control domestic and international supply and demand imbalances resulting from animal disease and weather conditions, global economic growth, changes in consumption habits, and government-imposed sanitary and trade restrictions. Competitive pressures from other Brazilian or international producers and exporters also affect the company’s margins. Product Concentration Increases Risks: The ratings incorporate risks associated with geographic and product concentration in beef protein, the potential for disease outbreaks, and the potential negative effect of foreign exchange fluctuations. Minerva is more exposed to these risks than Brazilian competitors such as JBS and Marfrig because of its higher export concentration. Exports represent 65.6% of its revenue in the first quarter of 2012. Positive FCF Expected in 2012: Fitch expects Minerva’s operations to improve in 2012, helped by moderate volume growth in all of its markets. Stronger cash flow from operations (CFFO) coupled with reduced capital spending should result in weak, but positive, FCF generation in 2012. Minerva has been FCF negative for the past seven years. Leverage Expected to Improve: Minerva's net leverage is expected to decrease to approximately 3.0x by the end of 2012, due to improvements in its operating performance and mildly positive FCF generation. This leverage ratio is considered appropriate for the rating category during a positive cycle. However, a temporary increase in Minerva's leverage ratios is possible due to further weakening of the Brazilian real, as 76.3% of its total debt as of March 31, 2012 was denominated in U.S. dollars. Ratings are Linked: Fitch has linked the ‘B+’ ratings of Minerva Luxembourg S.A. through its parent and subsidiary rating methodology. Minerva guarantees the notes that have been issued by this subsidiary. What Could Trigger a Rating Action Analysts Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Gisele Paolino +55 21 4503-2624 gisele.paolino@fitchratings.com Latin America High Yield November 8, 2012 Negative Rating Action: The ratings are likely to remain stable unless cash flow generation and leverage ratios trend differently than Fitch’s expectations. A negative rating action could occur if Fitch’s expectations for positive cash flow generation fail to materialize or net leverage does not decline below 4.0x on a normalized basis. This could be a result of either a large debt-financed acquisition or asset purchases, or as a result of operational deterioration. Positive Rating Action: A positive rating action could be triggered by a significant leverage decrease from current levels, but is unlikely to be achieved solely by improving operations in the short-to-medium term. 165 Corporates Recovery Rating Minerva’s recovery rating of ‘RR4’ indicates that the company’s creditors would have average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. This rating reflects a recovery rating cap for Brazil issuers of ‘RR4’, whereas Minerva’s modified recovery analysis suggests a higher recovery level for the unsecured debt consistent with ‘RR3’. Fitch has performed a liquidation analysis in the event of bankruptcy. However, this scenario seems extremely unlikely given the company’s strong business position. Fitch has also estimated the enterprise valuation in the event of financial distress. This analysis considers that any debt default by Minerva would likely be the result of a sudden deterioration in the business environment either by import ban on Brazilian beef due to health considerations by a considerable number of export countries, or by a sharp reduction in beef consumption due to economic distress abroad. It also considers that company operations will remain valuable, but at a relatively low multiple of 5x. Recovery Analysis Minerva S.A. (BRL Mil.) IDR: B+ Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 372.0 15 316.2 5.0 1,581.0 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 180.0 45.0 225.0 746.4 207.4 216.1 1,127.8 2,297.7 Advance Available to Rate (%) Creditors 0 80 165.9 50 108.1 25 282.0 555.9 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 1,581.0 158.1 1,422.9 Recovery Rating RR1 Rating BB+ Distribution of Value Secured Priority Secured Lien 510.2 Value Recovered 510.2 Notching 3 The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Concession payments allocated to subordinated debt should never result in higher recoveries than those of senior unsecured debt. Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 1,422.9 510.2 912.7 45.6 867.1 Unsecured Priority Senior Unsecureda Unsecured Subordinated Value Recovered — 912.7 Lien — 1,585.0 182.6 Recovery (%) 100 Recovery (%) — 58 0 Concession Allocation (%) — 100 0 Recovery Rating — RR3 RR6 Notching — 1 2 Rating — BB B a ACC. Source: Fitch. Latin America High Yield November 8, 2012 166 Corporates Corporate Structure — Minerva (As of March 31, 2012) Vilela de Queiroz Family (100.0%) VDQ Holding Free Float 68.1% 31.9% Minerva S.A. LTM EBITDA (BRL Mil.) Consolidated Total Debt (BRL Bil.) TD/EBITDA (x) ND/EBITD 100.0% Minerva Log 55.0% Brascasing 92.0% Friasa (Paraguary) 100.0% PULSA (Uruguay) 80.0% Minerva Dawn Farms 372 2.3 6.3 4.0 100.0% Minerva Overseas I Ltd. 100.0% Minerva Overseas II Ltd. 100.0% 100.0% Minerva Luxembourg S.A. Finance Subsidiary No Revenue Total Debt (USD Mil.) Minerva Colombia S.A.S. 860 Source: Minerva S.A., Fitch. Latin America High Yield November 8, 2012 167 Corporates Debt and Covenant Synopsis Minerva S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Financial Covenants Consolidated Net Debt/EBITDA (Maximum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Minerva Luxembourg S.A. Minerva S.A. Jan. 26, 2007 Feb. 1, 2017 Unsecured and Unsubordinated Debt USD35.2 Million Minerva Luxembourg S.A. Minerva S.A. Jan. 22, 2010 Nov. 15, 2019 Unsecured and Unsubordinated Debt USD373.7 Million Minerva Luxembourg S.A. Minerva S.A. March 22, 2012 March 22, 2022 Unsecured and Unsubordinated Debt USD450 Million Less than 3.5x. Less than 3.5x. Less than 3.5x. Not later than 30 days following a change of control, Minerva Overseas will make an offer to purchase all outstanding notes at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase. Minerva will not, and will not permit any subsidiary to, make any asset sale unless the following conditions are met: (i) the asset sale is for fair market value, as determined in good faith; (ii) at least 75% of the consideration consists of cash or cash equivalents received at closing. Debt Restriction Additional Debt Restriction Neither Minerva nor any guarantor may incur any debt that is subordinate in right of payment to other debt of Minerva or any Guarantor unless such debt is also subordinate in right of payment to the notes or the guaranty on substantially identical terms. Limitation on Liens Limitation on Sale and Leaseback Transactions Limitation on Restricted Payments No debt will be deemed to be subordinated in right of payment to any other debt solely by virtue of being unsecured or secured on a first or junior lien basis. Neither Minerva nor any guarantor may incur any debt that is subordinate in right of payment to other debt of Minerva or any Guarantor unless such debt is also subordinate in right of payment to the notes or the guaranty on substantially identical terms. Minerva will not, and will not permit any subsidiary to, directly or indirectly incur or permit to exist any lien of any nature whatsoever on any of its properties or assets without effectively providing that the notes are secured equally and ratably with the obligations so secured for so long as such obligations are so secured. Minerva will not, and will not permit any subsidiary to, enter into any sale and leaseback transaction with respect to any property unless Minerva or such subsidiary would be entitled to: (i) incur debt in an amount equal to the attributable debt with respect to such sale and leaseback transaction; and (ii) create a lien on such property or asset securing such attributable debt without equally and ratably securing the notes. Minerva will not, and will not permit any Minerva will not, and will not permit Minerva will not, and will not permit any Subsidiary to, subsidiary to, directly or indirectly: (i) declare any subsidiary to, directly or directly or indirectly:(i)declare or pay any dividend or or pay any dividend or make any distribution indirectly: (i) declare or pay any make any distribution on its Equity Interests held by on its equity interests held by persons other dividend or make any distribution on Persons other than Minerva or any of its Subsidiaries than Minerva or any of its substantially its equity interests held by persons (other than (A) dividends or distributions paid in wholly owned subsidiaries; (ii) purchase, other than Minerva or any of its Minerva’s Qualified Equity Interests and (B) dividends redeem or otherwise acquire or retire for subsidiaries; (ii) purchase, redeem or distributions by a Subsidiary payable, on a pro rata value any equity interests of Minerva held by or otherwise acquire or retire for basis or on a basis more favorable to Minerva, to all persons other than Minerva or any of its value any equity interests of Minerva holders of any class of Capital Stock of such substantially wholly owned subsidiaries; or held by persons other than Minerva Subsidiary a majority of which is held, directly or (iii) repay, redeem, repurchase, defease or or any of its subsidiaries; or (iii) indirectly, by Minerva); (ii)purchase, redeem or otherwise acquire or retire for value, or repay, redeem, repurchase, defease otherwise acquire or retire for value any Equity make any payment on or with respect to any or otherwise acquire or retire for Interests of Minerva held by Persons other than subordinated debt except a payment of value, or make any payment on or Minerva or any of its Subsidiaries; or (iii)repay, interest or principal at stated maturity (other with respect to any subordinated redeem, repurchase, defease or otherwise acquire or than a repayment, redemption, repurchase, debt except a payment of interest or retire for value, or make any payment on or with defeasance or acquisition or retirement in principal at stated maturity. respect to, any Subordinated Debt (other than (x) a anticipation of satisfying a sinking fund payment of interest or principal at Stated Maturity or (y) obligation, principal installment or final a repayment, redemption, repurchase, defeasance or maturity, in each case, due within one year acquisition or retirement in anticipation of satisfying a of the date of such repurchase, defeasance sinking fund obligation, principal installment or final or acquisition or retirement) maturity, in each case, due within one year of the date of such repurchase, defeasance or acquisition or retirement); Dividends Restriction Limitation on Dividend Minerva will not, and will not permit any subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction of any kind on the ability of any subsidiary to (i) pay dividends or make any other distributions on any equity interests of the subsidiary owned by Minerva or any other subsidiary; (ii) pay any debt or other obligation owed to Minerva or any other subsidiary; (iii) make loans or advances to Minerva or any other subsidiary; or (iv) transfer any of its property or assets to Minerva or any other subsidiary. Local Currency Debentures Overview Issuer Minerva S.A. Guarantors VDQ Holdings S.A. Document Date July 10, 2010 Maturity Date July 10, 2015 Description of Debt Simple, unsecured, and nonconvertible in shares. Amount BRL200 Million Financial Covenants Consolidated Net Less than 3.5 x Debt/EBITDA (Maximum) Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 168 Corporates Financial Summary Minerva S.A. (BRL Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt-Service Coverage Operating EBITDAR/Debt-Service Coverage FFO Fixed Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income Net Income LTM 3/31/12 2011 2010 2009 2008 371,983 371,983 9.2 9.2 21.9 (1.9) (6.0) 327,725 327,725 8.2 8.2 13.1 (4.6) 6.1 245,665 245,665 7.2 7.2 2.1 (4.2) 4.3 184,573 184,573 7.1 7.1 1.9 (4.2) 19.5 153,376 153,376 7.2 7.2 6.1 (21.9) (51.0) 1.2 0.7 0.7 0.4 0.4 1.2 0.6 1.6 0.7 1.1 1.0 1.0 0.4 0.4 1.1 0.2 1.0 (0.1) 0.3 1.5 1.5 0.6 0.6 0.3 0.1 1.5 0.3 0.3 1.8 1.8 0.5 0.5 0.3 0.0 1.1 0.2 1.0 1.5 1.5 0.3 0.3 1.0 (0.8) 0.2 (0.3) 3.5 6.3 4.0 6.3 4.0 0.3 0.1 5.5 6.4 4.1 6.4 4.1 0.2 0.3 36.6 6.7 4.3 6.7 4.3 0.1 0.1 36.6 6.6 4.3 6.6 4.3 0.1 0.2 13.4 9.2 6.2 9.2 6.2 0.1 0.3 3,619,125 846,276 282,669 2,053,283 2,335,952 — 2,335,952 2,335,952 714,268 3,050,220 3,499,191 746,382 541,568 1,561,081 2,102,649 — 2,102,649 2,102,649 819,405 2,922,054 2,628,350 576,464 236,891 1,402,508 1,639,399 — 1,639,399 1,639,399 540,273 2,179,672 2,072,813 424,009 291,071 932,302 1,223,373 — 1,223,373 1,223,373 527,339 1,750,712 2,018,221 466,540 357,840 1,052,083 1,409,923 — 1,409,923 1,409,923 314,373 1,724,296 100,050 (1,178) 98,872 (151,715) (23,524) (76,367) 50,031 280,317 (4,455) 72,115 303,836 4,040,658 8.9 326,684 568,862 (37,704) 46,185 (56,771) (10,586) (160,850) (11,762) (183,198) (17,805) 271,080 8,946 90,895 169,918 3,976,977 16.7 282,346 335,365 41,715 72 (122,546) 191,427 68,881 (206,122) (6,555) (143,796) (166,166) 464,393 3,914 (5,890) 152,455 3,408,205 31.0 216,846 167,281 22,898 23 (71,382) 100,657 29,275 (138,595) (109,320) (305) (65,641) 158,999 (26,264) (42,531) 2,602,119 22.7 142,310 104,800 81,992 82 2,648 (116,747) (114,099) (351,013) (465,112) 570,544 (15,338) 90,094 2,120,800 45.0 127,000 102,349 (215,546) (216) Source: Fitch. Latin America High Yield November 8, 2012 169 Corporates OAS S.A. (Formerly OAS Engenharia e Participações S.A.) Construtora OAS Ltda. and OAS Empreendimentos S.A. Full Rating Report Key Rating Drivers Ratings High Leverage: The ratings of OAS S.A. and its main operating subsidiary, Construtora OAS Ltda., reflect the group’s high leverage, which is a result of its aggressive expansion strategy. The OAS group had a net debt-to-EBITDA ratio of 5.9x during 2011. OAS S.A. and Construtora OAS Ltda. Foreign Currency Long-Term Issuer Default Rating (IDR) B Local Currency Long-Term IDR National Scale Long-Term Rating B BBB(bra) OAS S.A. 2nd Debentures, Matures 2013 3rd Debentures, Matures 2016 4th Debentures, Matures 2027 5th Debentures, Matures 2015 BBB(bra) BBB(bra) BBB(bra) BBB(bra) OAS Empreendimentos S.A. BB+(bra) National Long-Term Rating 2nd Debentures, Matures 2014 BBB(bra) IDR – Issuer default ratings. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Financial Data OAS S.A. (BRL Mil.) Net Revenues Total Adjusted Debt FFO EBITDA Cash Marketable FFO Adjusted Leverage (x) Adjusted Net Debt/EBITDA (x) EBITDA/Debt Service Coverage (x) 12/31/11 4,637.5 3,752.8 554.7 385.2 1,465.0 12/31/10 4,517.2 2,619.5 (32.9) 179.0 1,162.6 4.5 20.6 5.9 8.1 0.3 0.2 Analysts Liliana Yabiku +55 11 4504-2600 liliana.yabiku@fitchratings.com Satisfactory Liquidity: As of Dec. 31, 2011, OAS reported consolidated cash and marketable securities of BRL1.465 million and total debt of BRL3.753 million. These figures compare with BRL1.163 million of cash and BRL2.620 million of debt at the end of 2010. Fitch expects that OAS will be able to preserve a satisfactory cash reserve to face the group’s increased backlog. Operating Results Need to Improve: Group OAS faces the challenge to continue recovering its operating margins on a consistent basis. For a recovery to occur, the company will need to keep heavy construction costs under control, increase the contribution of its infrastructure segment, and improve the operating results of its real estate construction business, OAS Empreendimentos S.A. Construtora OAS: Construtora OAS has historically been the group’s main operating company and cash generator. The company is 100% controlled and is operationally integrated with OAS. Construtora OAS also guarantees 47% of OAS’s consolidated corporate debt, net of “project finance” loans. In 2011, Construtora OAS accounted for 80% of the group’s consolidated revenue and 54% of EBITDA. Robust Backlog: During 2011 and first-quarter 2012, the OAS group continued to maintain high levels of backlog. As of March 31, 2012, Construtora OAS’ backlog was BRL17.4 billion, which compares to BRL18 billion at year-end 2011 and BRL12 billion on 2010. The current backlog and the positive scenario for the infrastructure sector should ensure the group’s growth in the next few years. What Could Trigger a Rating Action Negative Rating Action: The ratings could be negatively pressured by a downturn in heavy construction activities or increased costs that pressure margins. A weaker cash position and higher leverage could also result in a rating downgrade. Positive Rating Action: Ratings upgrades or a change in the Rating Outlook to Positive could result from a continued improvement in operating results, combined with significant leverage reduction and an improved liquidity position. Jose Romero +55 11 4504-2600 jose.romero@fitchratings.com Latin America High Yield November 8, 2012 170 Corporates Organizational Structure — OAS Group (As of March 31, 2012) Cesar de Araujo Mara Pires Jose Adelmario Pinheiro Filho 100% 100% CMP Participações Ltda. LP Participações Ltda. 90% 10% OAS S.A. 100% 100% OAS Investimentos S.A. OAS Empreendimentos 100% 100% COESA Engenharia Ltda. 25% Invepar S.A. Construtora OAS Ltda. 100% Investimentos Diretos SPEs Consorcios Sucursais no Exterior SPEs Source: Fitch and OAS Group. Latin America High Yield November 8, 2012 171 Corporates Debt and Covenant Synopsis First Debenture Issued by OAS S.A. Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Provider of Pledge of Shares Principal Repayment (Date/% of Total) Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Issuer Financial Covenant Other Relevant Early Maturity Events OAS S.A. Construtora OAS Ltda. Oct. 29, 2010 Debenture Deed: Oct. 18, 2010 Oct. 29, 2018 First Debenture Simple, Not Convertible BRL400 Million OAS Investimentos S.A.: 8,531,973 voting shares and 17,063,946 preferential shares of Investimentos e Participações em Infra-Estrutura S.A. INVEPAR. Oct. 29 of the following years: 2013 (16.6666%); 2014 (16.6666%); 2015 (16.6666%); 2016 (16.6666%); 2017 (16.6666%); and 2018 (16.6670%). Net debt/EBITDA of Construtora OAS not to exceed 3.0x on annual consolidated financial statements. Net debt/total assets of OAS S.A. not to exceed 60% on annual consolidated financial statements. 1. 2. 3. 4. 5. 6. 7. 8. 9. Nonpayment of any financial obligation of this issue by the issuer or guarantors at the respective maturity dates; Noncompliance of any obligation within the established period that may lead to early maturity of any debt obligation of the issuer or guarantor equal to or above BRL20 million; Change or transfer of direct or indirect shareholding control of the issuer reducing to less than 50% plus one share of its voting control or result, by any reason, in the current controlling shareholders not exercising effective control; Split, merger, or incorporation or any form of corporate reorganization involving the issuer or guarantors without the previous knowledge and approval by the debenture holders, unless the operation exclusively involves the issuer and/or guarantors and their subsidiaries and will not result in change of shareholding control of the issuer and/or guarantors; Noncompliance of any financial obligation of the issuer or guarantors of amount equal or above BRL20 million, or equivalent in other currency, or any other obligation that may lead to an early maturity of any financial obligation of the issuer or guarantors of an amount equal or above BRL20 million or equivalent in other currency; Protests against the issuer or guarantors equal or above BRL20 million or equivalent in other currency, unless not legitimate, cancelled, or suspended by judicial decision; Noncompliance of judicial decision against the issuer or guarantors including fiscal executions of an amount equal or above BRL20 million or equivalent in other currencies; Confiscation or pledge of assets of the issuer or guarantors of amount equal or above BRL20 million or equivalent in other currency, unless, legally contested or suspended, within 15 days of the event, or substituted by a guarantee that does not affect or bind the issuer assets; Governmental fiscal or environmental penalties of amount equal or above BRL10 million, unless legally contested within the established period; not legitimated by the issuer and guarantor or cancelled. Continued on the next page. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS S.A. and Fitch Ratings. Latin America High Yield November 8, 2012 172 Corporates Debt and Covenant Synopsis Second Debenture Issued by OAS S.A. (Continued) Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Principal Repayment (Date/% of Total) OAS S.A. Construtora OAS Ltda June 25, 2011 Debenture Deed: May 25, 2011 June 25, 2013 Second Debenture Simple, Not Convertible BRL200 Million Dec. 25, 2012 (14.28%); Jan. 25, 2013 (14.28%); Feb. 25, 2013 (14.28%); March 25, 2013 (14.28%); April 25, 2013 (14.28%); May 25, 2013(14.28%) and June 25, 2013 (14.32%) Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Issuer Financial Covenant Other Relevant Early Maturity Events Net debt/EBITDA of Construtora OAS not to exceed 3.0x on annual consolidated financial statements. Net debt/total assets of OAS S.A. not to exceed 60% on annual consolidated financial statements. 1. 2. 3. 4. 5. 6. 7. 8. 9. Nonpayment, by the issuer, of any financial obligation due to the debenture holders at the respective due dates; Noncompliance, by the issuer, of any nonfinancial obligation as per the debenture deed within the established period or, if not established, within seven working days; Change or transfer of direct or indirect shareholding control of the issuer reducing to less than 50% plus one share of its voting control or result, by any reason, in the current controlling shareholders not exercising effective control; Split, merger or incorporation, or any form of corporate reorganization involving the issuer or the guarantor without the previous knowledge and approval by the debenture holders; Noncompliance of any financial obligation of the issuer or guarantors of an amount equal to or above BRL20 million, or equivalent in other currency, or any other obligation that may lead to an early maturity of any financial obligation of the issuer or guarantors of amount equal or above BRL20 million or equivalent in other currency; Protests against the issuer or guarantors equal to or above BRL20 million or equivalent in other currency, unless not legitimate, cancelled, or suspended by judicial decision; Noncompliance of judicial decision against the issuer or guarantors including fiscal executions, of an amount equal to or above BRL20 million or equivalent in other currencies; Confiscation or pledge of assets of the issuer or guarantors of amount equal or above BRL20 million or equivalent in other currency, unless, legally contested or suspended, within 15 days of the event, or substituted by a guarantee that does not affect or bind the issuer assets; Governmental fiscal or environmental penalties of an amount equal or above BRL10 million, unless legally contested within the established period; not legitimated by the issuer and guarantor or cancelled. Continued on the next page. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS S.A. and Fitch Ratings. Latin America High Yield November 8, 2012 173 Corporates Debt and Covenant Synopsis Third Debenture Issued by OAS S.A. (Continued) Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Principal Repayment (Date/% of Total) Financial Covenants Financial Covenant OAS S.A. Construtora OAS Ltda. Dec. 12, 2011 Debenture Deed: Nov. 17, 2011 Dec. 12, 2016 Third Debenture Simple, Not Convertible BRL300 million Dec. 12, 2014 (20%); June 12, 2015 (20%); Dec. 12, 2015 (20%); June 12, 2016 (20%); Dec. 12, 2016 (20%). Net debt/EBITDA of Construtora OAS and/or OAS S.A. not to exceed 3.0x on annual consolidated financial statements; net debt/total assets of Construtora OAS and/or OAS S.A. not to exceed 60%. Other Relevant Early Maturity Events 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Bankruptcy, dissolution, request of self-bankruptcy, or similar of the issuer or guarantor; Request of extra judicial recovery not eliminated within five days by the issuer or guarantor; Noncompliance by the issuer of any financial obligation established by the debenture deed not solved within seven working days; Noncompliance with the obligation of use of the debenture funds exclusively for debt repayment in accordance with the terms established for this debenture issue; Delinquency by the issuer or guarantor of financial obligation of amount equal or above BRL20 million, or equivalent in other currency, unless proven illegitimate, solved, or legally contested; Noncompliance, within 30 days, of any judicial decision against the issuer or guarantor of amount above BRL20 million, or equivalent in other currency; Protests against the issuer or guarantor of amount above BRL20 million, unless proved to be illegitimate or legally contested; Split, merger, or incorporation of any form of corporate reorganization of the issuer or guarantor since such operations imply the disposal of relevant assets, without agreement from the debenture holders; Change of activity of the issuer with core business no longer being civil construction and real estate development; Capital reduction of the issuer above 10% of equity, unless previously authorized by the debenture holders; Nonrenewal, cancellation, or suspension of authorizations and licenses, including environmental, resulting in adverse effects for the continuation of activities of the issuer. Continued on the next page. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS S.A. and Fitch Ratings. Latin America High Yield November 8, 2012 174 Corporates Debt and Covenant Synopsis Fourth Debenture Issued by OAS S.A. (Continued) Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Principal Repayment (Date/% of Total) Financial Covenants Financial Covenant OAS S.A. Construtora OAS Ltda. Jan. 13, 2012 Debenture Deed: Jan. 6, 2012 Jan. 13, 2027 Fourth Debenture Simple, Not Convertible, Private (FI FGTS) BRL250 million Jan. 13, 2015 (current nominal amount/13); Jan. 13, 2016 (current nominal amount/12); Jan. 13, 2017 (current nominal amount/11); Jan. 13, 2018 (current nominal amount/10); Jan. 13, 2019 (current nominal amount/9); Jan. 13, 2020 (current nominal amount/8); Jan. 13, 2021 (current nominal amount/7); Jan. 13, 2022 (current nominal amount/6); Jan. 13, 2023 (current nominal amount/5); Jan. 13, 2024 (current nominal amount/4); Jan. 13, 2025 (current nominal amount/3); Jan. 13, 2026 (current nominal amount/2); Jan. 13, 2027 (current nominal amount/1). Net debt/total assets of the issuer not to exceed 0.6; net debt/EBITDA of Construtora OAS not to exceed 3.0x; cash to debt service/financial result of the issuer not to exceed 1.2x. Other Relevant Early Maturity Events 1. 2. 3. 4. 5. 6. 7. 8. Bankruptcy, dissolution, request of extra judicial recovery, or self-bankruptcy not eliminated within 30 days, decree of bankruptcy or similar of the issuer, guarantor, OAS Investimentos S.A., or INVEPAR; Noncompliance, by the issuer of any financial obligation established by the debenture deed not solved within three working days; Noncompliance by the issuer any nonfinancial obligation established by the debenture deed, not solved within 10 days; Noncompliance with the obligation of use of the debenture funds exclusively for development or acquisition of projects considered eligible in accordance with the terms established for this debenture issue; Delinquency by the issuer or by the guarantor of financial obligation of amount equal or above BRL20 million, or equivalent in other currency, unless proven illegitimate, solved, legally contested; Noncompliance, within 30 days, of any judicial decision against the issuer or the guarantor of amount above BRL20 million, or equivalent in other currency; Protests against the issuer or the guarantor of amount above BRL20 million, unless proved to be illegitimate or legally contested; Nonrenewal, cancellation, or suspension of authorizations and licenses, including environmental resulting in adverse effect for the continuation of activities of the issuer or guarantor. Continued on the next page. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS S.A. and Fitch Ratings. Latin America High Yield November 8, 2012 175 Corporates Debt and Covenant Synopsis Fifth Debenture Issued by OAS S.A. (Continued) Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Principal Repayment (Date/% of Total) Financial Covenants Financial Covenant OAS S.A. Construtora OAS Ltda. April 15, 2012 Debenture Deed: May 17, 2012 May 15, 2015 Fifth Debenture Simple, Not Convertible BRL209 million Dec. 15, 2013 (5.5556%); Jan. 15, 2014 (5.5556%); Feb. 15, 2014 (5.5556%); March 15, 2014 (5.5556%); April 15, 2014 (5.5556%); May 15, 2014 (5.5556%); June 15, 2014 (5.5556%); July 15, 2014 (5.5556%); Aug. 15, 2014 (5.5556%); Sept. 15, 2014 (5.5556%); Oct. 15, 2014 (5.5556%); Nov. 15, 2014 (5.5556%); Dec. 15, 2014 (5.5556%); Jan. 15, 2015 (5.5556%); Feb. 15, 2015 (5.5556%); March 15, 2015 (5.5556%); April 15, 2015 (5.5556%); May 15, 2015 (5.5548%). Net debt/EBITDA of Construtora OAS not to exceed 3.0x on annual consolidated financial statements. Net debt/total assets of the issuer not to exceed 60%. Other Relevant Early Maturity Events 1. 2. 3. 4. Bankruptcy, dissolution, request of self-bankruptcy, decree of bankruptcy or similar of the issuer or guarantor; Noncompliance, by the issuer of any financial obligation established by the debenture deed; Noncompliance by the issuer of any nonfinancial obligation established by the debenture deed; Noncompliance with the obligation of use of the debenture funds exclusively for debt repayment in accordance with the terms established for this debenture issue; 5. Delinquency by the issuer or by the guarantor of financial obligation of amount equal or above BRL20 million, or equivalent in other currency, unless proven illegitimate or solved or legally contested; 6. Noncompliance of any judicial decision against the issuer or the guarantor of amount above BRL20 million, or equivalent in other currency; 7. Protests against the issuer or the guarantor of amount above BRL20 million, unless proved to be illegitimate or legally contested; 8. Capital reduction of the issuer or the guarantor above 10% of equity, unless previously authorized by the debenture holders; 9. Nonrenewal, cancellation, or suspension of authorizations and licenses, including environmental resulting in adverse effect for the continuation of activities of the issuer. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS S.A. and Fitch Ratings. Latin America High Yield November 8, 2012 176 Corporates Debt and Covenant Synopsis First Debenture Issued by OAS Empreendimentos S.A. Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Real Guarantees Principal Repayment (Date/% of Total) Other Relevant Early Maturity Events First Debenture Issued by OAS Empreendimentos S.A. OAS S.A. Nov. 3, 2010 Debenture Deed: Nov. 3, 2009 Nov. 3, 2014 First Debenture Simple, Not Convertible BRL300 Million Fiduciary lien on shares of single-purposes companies (SPCs) constituted for real estate projects eligible for the transaction and on financial assets related to the debentures; mortgage of real estate assets acquired with the debenture funds; fiduciary assignment of credit rights represented by eligible receivables and funds as per the terms of the debenture deed. Nov. 3, 2012 (20%); May 3, 2013 (20%); Nov. 3, 2013 (20%); May 3, 2014 (20%); Nov. 3, 2014 (20%). 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Bankruptcy, dissolution, request of self-bankruptcy not eliminated within 60 days, decree of bankruptcy or similar of the issuer, guarantor, or any relevant subsidiary; Request of extra judicial recovery by the issuer, guarantor or any relevant subsidiary; Disposal, providing of guarantee to third party of any asset linked to the real guarantee agreement without previous agreement from the debenture holders, unless associated to obligation from judicial determination; Noncompliance, by the issuer, guarantor, or relevant subsidiary of any financial obligation established by the debenture deed not solved within two working days; Noncompliance by the issuer or relevant subsidiary of any nonfinancial obligation established by the debenture deed, not solved within 30 days; Noncompliance with the obligation of use of the debenture funds exclusively for development or acquisition of projects considered eligible in accordance with the terms established for this debenture issue; Delinquency by the issuer or by any relevant subsidiary of financial obligation of amount equal or above BRL5 million, or equivalent in other currency, unless proven illegitimate or solved or legally contested within 30 days; Delinquency by the guarantor of any debt or financial obligation of amount equal or above BRL15 million, or equivalent in other currency, unless solved or legally contested within 30 days; Noncompliance, within 30 days, of any judicial decision against the issuer or any relevant subsidiary of amount above BRL5 million, or equivalent in other currency; Protests against the issuer or relevant subsidiary not solved or declared nonlegitimate within 30 days, of amount above BRL5 million, unless proved to be illegitimate or legally contested; Split, merger, or incorporation or any form of corporate reorganization of the issuer since such operations imply the disposal of relevant assets, without agreement from the debenture holders; Change of activity of the issuer with core business no longer being civil construction and real estate development; Capital reduction of the issuer above BRL5 million, unless previously authorized by the debenture holders; Nonrenewal, cancellation, or suspension of authorizations and licenses, including environmental resulting in adverse effect for the continuation of activities of the Issuer or relevant subsidiaries; More than two notches downgrading of the original national scale ‘BBB’ risk classification in November 2009, unless the issuer presents within 30 days new guarantees subject to approval by the debenture holders in a way as to maintain a risk classification equivalent to ‘BB+’ on the national scale, which, if not obtained, the issuer will have additional 30 days to the redemption and cancellation of the total debenture issue; Sale of the direct or indirect shareholding control of the issuer or the single-purpose companies, which form part of the real guarantees of the debenture issue without previous authorization from the debenture holders. Continued on the next page. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS Empreendimentos and Fitch Ratings. Latin America High Yield November 8, 2012 177 Corporates Debt and Covenant Synopsis Second Debenture Issued by OAS Empreendimentos S.A. (Continued) (Foreign Currency Notes) Overview Issuer Guarantors Issue Date Documents Date Maturity Date Description of Debt Amount Principal Repayment (Date/% of Total) Financial Covenants Issuer Financial Covenant Second Debenture Issued by OAS Empreendimentos S.A. OAS S.A. June 15, 2010 Debenture Deed: June 15, 2010 July 15, 2014 Second Debenture Simple, Not Convertible BRL60 million July 15, 2012 (20%); Jan. 15, 2013 (20%); July 15, 2013 (20%); Jan. 15, 2014 (20%); July 15, 2014 (20%). Net debt (*)/Equity equal or lower than 1.0x on half-yearly consolidated financial statements. (*) Net debt excludes financings from the Housing Financial System (SFH) and financings with funds from the Brazilian Savings and Loan System (SBPE) and from the Brazilian Employees Severance Indemnity Fund (FGTS), as well as cash and equivalents. Other Relevant Early Maturity Events 1. 2. 3. 4. 5. 6. 7. 8. Incorporation, merger, split or any form of corporate reorganization or disposal of relevant assets, unless previously approved by the majority of debenture holders in the market, with the exception of corporate reorganization without change of the current indirect controlling shareholders of the issuer; Noncompliance with obligations related to government fiscal environmental authorities during the issue period; Request of self-bankruptcy or bankruptcy not cancelled within 60 days; decree of bankruptcy, request of judicial or extrajudicial recovery, or any similar procedure; Nonpayment of principal, remuneration, or any financial obligation of the debentures on the due dates; Reduction above 10% of the issuer’s capital, unless previously authorized by majority in debenture holders meeting; Early maturity of any financial obligation of at least BRL5 million; Delinquency of payment of any issuer’s debt of, at least BRL5 million, unless illegitimate and since proved by the issuer or legally contested. Downgrading of national scale risk classification of the debenture issue to below ‘BBB–’, unless the issuer, within 30 days, offers guarantees — subject to the approval of debenture holders — in a way that the risk classification of the debenture issue is maintained equivalent to ‘BBB–’. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: OAS Empreendimentos and Fitch Ratings. Latin America High Yield November 8, 2012 178 Corporates Financial Summary OAS S.A. (BRL Mil., As of Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 12/31/11 2010 2009 2008 2007 385,217 385,217 8.3 8.3 18.8 (6.6) 7.8 178,990 178,990 4.0 4.0 3.9 (6.9) (16.7) 203,512 203,512 5.4 5.4 26.6 (6.0) 28.2 179,807 179,807 6.8 6.8 9.1 0.6 (1.7) 115,152 115,152 7.4 7.4 N.A. N.A. N.A. 3.0 1.4 1.4 0.3 0.3 3.0 (0.0) 1.2 (0.9) 0.8 1.1 1.1 0.2 0.2 0.8 (0.2) 1.2 (1.4) 6.8 2.7 2.7 0.5 0.5 6.8 (0.4) 1.3 (0.8) 2.4 3.4 3.4 0.6 0.6 2.4 0.2 1.5 2.5 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 4.5 9.7 5.9 9.7 5.9 0.1 N.A. 0.3 20.6 14.6 8.1 14.6 8.1 0.1 N.A. 0.3 2.4 6.2 2.8 6.2 2.8 0.1 N.A. 0.3 5.8 4.0 2.0 4.0 2.0 0.1 N.A. 0.3 N.A. 7,106,914 1,464,995 967,649 2,785,136 3,752,785 — 3,752,785 — 3,752,785 691,261 4,444,046 4,987,003 1,162,565 661,953 1,957,558 2,619,511 — 2,619,511 — 2,619,511 666,486 3,285,997 3,002,987 681,570 322,153 929,494 1,251,647 — 1,251,647 — 1,251,647 681,652 1,933,299 1,964,258 370,043 242,210 481,395 723,605 — 723,605 — 723,605 641,537 1,365,142 1,761,499 246,949 44,875 515,545 560,420 — 560,420 — 560,420 671,789 1,232,209 554,759 (683,404) (128,645) N.A. (148,253) (30,146) (307,044) (349,746) (87,416) 962,659 64,322 N.A. 282,775 (32,883) (149,871) (182,754) N.A. (127,659) — (310,413) (755,027) (80,899) 1,425,533 299,793 (9,422) 569,565 438,528 (520,508) (81,980) N.A. (108,811) (36,260) (227,051) N.A. (222,136) 719,116 84,035 (813) 353,151 71,425 86,955 158,380 N.A. (62,967) (79,365) 16,048 N.A. (3,959) 108,763 N.A. 2,747 123,599 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 4,637,514 3 276,507 278,898 N.A. 53,225 4,517,154 19 72,217 159,967 N.A. (112,650) 3,801,666 43 132,690 75,136 N.A. 186,599 2,658,419 71 115,817 52,731 N.A. (10,859) 1,554,648 N.A. 62,404 N.A. N.A. 32,489 4.9 2.7 4.9 2.7 — N.A. 0.1 N.A. – Not available. Source: Fitch. Latin America High Yield November 8, 2012 179 Corporates OGX Petroleo e Gas Participações S.A. (OGX) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Sr. Unsecured Notes due 2018 B B/RR4 Local Currency Long-Term IDR B National Long-Term Rating BBB–(bra) IDR – Issuer default rating. Ratings Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR National Long-Term Rating Stable Stable Stable Stable Financial Data OGX Petroleo e Gas Participações S.A. (USD Mil.) Total Equity LTM 6/30/12 4,159 12/30/11 4,760 4,015 2,957 — (695) — 2,567 2,929 — (305) — Total Debt Cash and Equivalents Operating Revenue Net Income ROAE (%) High Expected Leveraged and Negative Cash Flow: OGX Petroleo e Gas Participações S.A.’s (OGX) ratings are constrained by its high leverage and the risk associated with being a startup. As of June 30, 2012, OGX had USD2.9 billion of cash and its pro forma debt was USD3.9 billion. As a startup, the company is not generating positive EBITDA. Lower than Expected Production Volumes Prolong Deleveraging: OGX’s production volumes are expected to be significantly lower than initially projected, which prolongs the expected negative free cash flow and delays the deleveraging process. OGX forecasts a production volume of 5,000 barrels of oil equivalent per day (boepd) for its first two wells in Tubarao Azul field, which is well below the 10,000–13,000 boepd initially projected. As a result, OGX’s production is expected to be below one-half of the initially projected volumes of 730,000 boepd by 2016. Reduction in EBITDA and Capex Projections: As a result of lower production volume prospects, Fitch Ratings has reduced its EBITDA projection to approximately USD2 billion by 2015 from approximately USD6 billion, using Fitch’s published midcycle price deck. The company has also reduced its capital investments to approximately USD3.3 billion in 2012 and 2013, and to less than USD1 billion from 2014 onwards. Should production volumes materialize at the new indicated levels, Fitch expects OGX to report negative free cash flow over the next three years. Cash deficits are expected to be funded with current liquidity with no material increases in debt levels. By 2015, Fitch expects leverage to decline to below 4.0x, as production comes on line and operating cash flow increases. Large Contingent and Prospective Resources; No Proven Reserves: OGX estimates it has a potential portfolio of approximately 10.8 billion of recoverable barrels of oil equivalent (boe) as of December 2010. The oil is located mainly in shallow waters or onshore in Brazil, and to a lesser extent in Colombia. Experienced, Knowledgeable Management: The management team is experienced in the oil and gas sector, with an average of 31 years of experience in the Brazilian oil and gas industry. This experience and firsthand knowledge somewhat lowers uncertainty regarding the ability to execute its production plans. What Could Trigger a Rating Action Analysts Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Lucas Aristizabal +312-368-3260 lucas.aristizabal@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: Catalysts for a negative rating action include a significant delay in bringing production online, coupled with lower than expected discovery levels and incorporating reserves, which could result in increased funding needs and a deterioration in OGX’s credit quality. A positive rating action could result from satisfactory production volumes, coupled with lower uncertainties regarding reserves. 180 Corporates Recovery Rating The recovery ratings for OGX’s capital market debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery, constrained by the soft cap of ‘RR4’ for bonds issued by Brazilian corporates. Using Fitch’s notching methodology, bondholder recovery value was assessed using the liquidation value of reserves, in line with Fitch’s sector-specific rating recovery methodology for oil and gas, detailed in the special report, “U.S. Exploration and Production Recovery Rating Methodology,” published March 20, 2008. Under this scenario, Fitch used a USD10/boe reserve value for the company’s prospective resources. Fitch has considered, for the purpose of the recovery analysis, potential proved reserves equivalent to 1 billion barrels of oil equivalent given that the company is in its developmental phase and there are no proven certified reserves up to date. This translates into a gross liquidation value of USD10 billion prior to administrative claims and concession payments to junior claimants. The 1 billion boe of potential reserves represents approximately 10% of OGX estimated prospective resources of 10.8 billion boe as of December 2010. Recovery Analysis OGX Petroleo e Gas Participações S.A. (OGX) (Mil.) IDR: B Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value Liquidation Value Cash Accounts Receivable Inventory Value of 1P Oil Reserves Total — — — — — Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total — — — — — — 10,000 10,000 Advance Available to Rate (%) Creditors 0 — 80 — 50 — 100 10,000 10,000 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 10,000 1000 9,000 Recovery Rating — — Rating — — Distribution of Value Secured Priority Senior Secured Secured Lien — — Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecured Unsecured Lien 4,015 — Value Recovered — — 9,000 — 9,000 450 8,550 Recovery (%) — — Notching — — The amount of concession payments is highly dependent on circumstances, but Fitch typically allows up to 5% of the recovery value available to senior unsecured creditors to be allocated to concession payments. Concession payments allocated to subordinated debt should never result in higher recoveries than those of senior unsecured debt. Value Recovered 4,015 — Recovery (%) 100 — Concession Allocation (%) 100 — Recovery Rating RR4 — Notching 0 — Rating B — Source: Fitch. Latin America High Yield November 8, 2012 181 Corporates Debt and Covenant Synopsis OGX Petroleo e Gas Participações S.A. (OGX) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt OGX Austria GmbH OGX Austria GmbH OGX and OGX Petroleo e Gas Ltda. May 26, 2011 2018 OGX and OGX Petroleo e Gas Ltda. March 27, 2012 2022 Senior Unsecured Notes Senior Unsecured Notes Financial Covenants Consolidated Leverage Net debt to EBITDA equal or lower than 3.5x or total debt higher (Maximum) than USD4 billion. Interest Coverage (Minimum) N.A. Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Restriction on Purchase of Notes Net debt to EBITDA equal or lower than 3.5x or total debt higher than USD4 billion. N.A. Change of control clause at 101% of principal plus accrued and unpaid interest. The issuer and its restricted subsidiaries cannot sell assets unless the asset sale is for fair market value and at least 75% is paid in cash (some exceptions are contemplated). If, following 365 days upon receipt, proceeds from asset sales have not been applied to purchase the notes or repay debt, proceeds of less than USD50 million will be accumulated or proceeds equal or in excess of such amount will be applied to make an offer to purchase the notes at 100% of principal plus accrued interest. Change of control clause at 101% of principal plus accrued and unpaid interest. The issuer and its restricted subsidiaries cannot sell assets unless the asset sale is for fair market value and at least 75% is paid in cash (some exceptions are contemplated). If, following 365 days upon receipt, proceeds from asset sales have not been applied to purchase the notes or repay debt, proceeds of less than USD50 million will be accumulated or proceeds equal or in excess of such amount will be applied to make an offer to purchase the notes at 100% of principal plus accrued interest. The issuer and restricted subsidiaries may incur permitted debt, subject to standard limitations, provided that following such transaction total net debt does not exceed USD4 billion and net debt to EBITDA does not exceed 3.5x. The issuer and its restricted subsidiaries are allowed to incur customary permitted liens, related to the normal course of business. These include a debt not to exceed the greater of USD1.5 billion and 15% of consolidated assets. The issuer and its restricted subsidiaries are allowed to make restricted payments if, among other things: no event of default occurs or is continuing, the issuer could incur in additional debt after such transaction, total restricted payments since the notes issuance do not exceed a certain amount, and the restricted payment does not exceed the greater of USD300 million and 3% of consolidated assets. Dividend payments are limited to 25% of consolidated net income and the minimum legally required dividend. The issuer and restricted subsidiaries may incur permitted debt, subject to standard limitations, provided that following such transaction total net debt does not exceed USD4 billion and net debt to EBITDA does not exceed 3.5x. The issuer and its restricted subsidiaries are allowed to incur customary permitted liens, related to the normal course of business. These include a debt not to exceed the greater of USD1.5 billion and 15% of consolidated assets. The issuer and its restricted subsidiaries are allowed to make restricted payments if, amongst other things: no event of default occurs or is continuing, the issuer could incur in additional debt after such transaction, and total restricted payments since the notes issuance do not exceed a certain amount. Dividend payments are limited to 25% of consolidated net income and the minimum legally required dividend. Default by the company or significant subsidiary on principal or interest of USD100 million or more, acceleration of a debt prior to its maturity in the same amount. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. On or after June 1, 2015, the issuer may elect to redeem the notes in whole or in part at the following prices, expressed as a percentage of nominal value: 2015: 104,25%, 2016:102,125%, 2017 and thereafter 100%. Before June 1, 2015, the issuer may also redeem the notes in whole or in part based on a make-whole premium plus accrued and unpaid interest. The redemption price will equal 100% of principal amount plus the greater of: 1) 1% of the outstanding amount of the notes and 2) the excess of the present value of the redemption Price at 2015 over the outstanding principal amount of the notes. Any redemption of the notes will be subject to either (1) there being at least USD150 million in aggregate principal amount of notes outstanding after such redemption or (2) the issuer redeeming all the then outstanding principal amount of the notes. In the event of changes in the withholding taxes laws, the issuer may redeem the outstanding notes in whole, but not in part, at 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date. Default by the company or significant subsidiary on principal or interest of USD75 million or more, acceleration of a debt prior to its maturity in the same amount. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. On or after April 1, 2017, the issuer may elect to redeem the notes in whole or in part at the following prices, expressed as percentage of nominal value: 2017: 104.188%, 2018:102,792%, 2019: 101,396, 2020 and thereafter 100%. Before April 1, 2017, the issuer may also redeem the notes in whole or in part based on a make-whole premium plus accrued and unpaid interest. The redemption Price will equal 100% of principal amount plus the greater of: 1) 1% of the outstanding amount of the notes and 2) the excess of the present value of the redemption Price at 2017 over the outstanding principal amount of the notes. Any redemption of the notes will be subject to either (1) there being at least USD150 million in aggregate principal amount of notes outstanding after such redemption or (2) the issuer redeeming all the then outstanding principal amount of the notes. In the event of changes in the withholding taxes laws, the issuer may redeem the outstanding notes in whole, but not in part, at 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date. N.A. Not applicable. Continued on next page. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 182 Corporates Debt and Covenant Synopsis OGX Petroleo e Gas Participações S.A. (OGX) (Continued) (Foreign Currency Notes) Other (Continued) Transactions with Affiliates Limits on Consolidations or Mergers Mandatory Redemption Substitution of the Issuer Transactions between issuer and affiliates for over USD20 million require the delivery of an Officer’s certificate to the trustee. Those above USD40 million require approval by the majority of the board of directors. Restrictions on merger or consolidation of issuer and subsidiaries. Exceptions require that the surviving entity will be a corporation existing under the laws of certain countries; it expressly assumes the obligations of the company, no vent of default occurs or is continuing, the company’s pro forma debt levels allow it to incur in additional indebtedness. OGX and its restricted subsidiaries may consolidate with, merge into or transfer all or part of its properties and assets within themselves. Transactions between issuer and affiliates for over USD20 million require the delivery of an Officer’s certificate to the trustee. Those above USD40 million require approval by the majority of the board of directors. Restrictions on merger or consolidation of issuer and subsidiaries. Exceptions require that the surviving entity will be a corporation existing under the laws of certain countries; it expressly assumes the obligations of the company, no vent of default occurs or is continuing, the company’s pro forma debt levels allow it to incur in additional indebtedness. OGX and its restricted subsidiaries may consolidate with, merge into or transfer all or part of its properties and assets within themselves. The notes will be redeemed if the issuer or affiliates sell assets in excess The notes will be redeemed if the issuer or affiliates sell assets in excess of USD50 million. of USD50 million. The issuer may, without the consent of the holders of the notes, be The issuer may, without the consent of the holders of the notes, be replaced and substituted by any guarantor or any wholly-owned replaced and substituted by any guarantor or any wholly owned subsidiary of a guarantor as principal debtor in respect of the notes. subsidiary of a guarantor as principal debtor in respect of the notes. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 183 Corporates Financial Summary OGX Petroleo e Gas Participações S.A. (OGX) (USD Mil., Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 (505) (505) — — 0.9 — (13.9) (432) (432) — — (1.5) — (5.9) (234) (234) — — (2.4) — (1.3) (162) (162) — — 3.1 — (1.9) 0.4 (2.5) (2.5) (2.1) (2.1) 0.4 (9.3) 2.9 (0.0) (1.1) (3.7) (3.7) (3.3) (3.3) (1.1) (17.3) 5.3 (0.2) — — — (1.7) (1.7) — (10.8) 7.9 (0.2) 292.0 (323.0) (323.0) (0.9) (0.9) 292.0 (0.8) 23.6 0.5 48.6 (7.9) (2.1) (7.9) (2.1) 0.1 — 0.0 (20.7) (5.9) 0.8 (5.9) 0.8 0.1 — 0.0 (1.1) (0.6) 10.3 (0.6) 10.3 0.0 — 0.9 1.2 (1.1) 25.0 (1.1) 25.0 0.0 — 1.0 8,538 2,957 43 3,971 4,015 — 4,015 0 4,015 4,159 8,174 7,701 2,929 12 2,556 2,567 — 2,567 0 2,567 4,760 7,327 6,017 2,555 136 7 143 — 143 0 143 5,566 5,709 5,600 4,206 173 — 173 — 173 0 173 5,267 5,440 (116) 12 (104) 0 (2,350) 0 (2,454) 0 516 1,395 6 322 (217) (242) (137) (379) 0 (1,979) 0 (2,358) 0 415 2,365 2 344 768 (127) (96) (223) 0 (1,253) 0 (1,476) 0 19 0 0 4 (1,452) 146 (34) 112 0 (243) 0 (132) 0 (58) 0 0 0 (189) 0 — (514) 199 0 (695) 0 — (438) 118 0 (305) 0 — (237) 0 0 (70) 0 — (164) 1 0 (51) Source: Fitch. Latin America High Yield November 8, 2012 184 Corporates Pan American Energy LLC (PAE) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B+ BB–/RR3 Local Currency Long-Term IDR BB National Long-Term Rating AAA(arg) Rating Outlooks Long-Term Foreign Currency IDR RWN Long-Term Local Currency IDR Stable National Long-Term Rating Stable RWN – Rating Watch Negative. Strong Business Position: Pan American Energy LLC (PAE) has a strong business position in the Argentine market and its credit metrics are expected to remain strong. Ownership by a strong parent, reliable cash flow generation, and significant levels of exports support PAE’s foreign currency issuer default rating (IDR), which is rated one notch above Argentina’s country ceiling. PAE is 60% owned by BP (rated ‘A’ by Fitch). PAE’s exports totaled USD2.1 billion in 2011 and favorably compare to its long-term debt maturities. In addition, the company has a track record of meeting payments during stressed sovereign scenarios. High Transfer and Convertibility Risk: Following the publication of Decree No 1722 on Oct. 26, 2011, Pan American Energy Sucursal Argentina (PAME, PAE’s Argentine branch) is obliged to repatriate 100% of its export revenues. Prior to this date, oil and gas producers could maintain up to 70% of export proceeds abroad, which provided a shield against transfer and convertibility risk. This change in regulation highlights an increased intervention by the government in the oil and gas sector and the potential for foreign currency controls. This risk is one factor that limits the company’s foreign currency IDR to ‘B+’. Exposure to Government Interference: The Argentine government has been increasing its interference in the oil and gas sector, as reflected by the recent publication of decree n°1277, which includes regulations related to investment levels in the oil and gas sector and domestic price references. The Secretary of Energy has reestablished, with certain modifications, the oil plus regime suspended in February 2012. This regime provides certain tax benefits for oil producers that increase production and reserves replacement levels. Due to the uncertainties regarding the magnitude and timing of such benefits, Fitch has excluded such benefits from its pro forma analysis. Large Reserves Base: As of December 2011, PAE had oil and gas reserves of 1.4 billion barrels of oil equivalent (boe), equivalent to 15.9 years of production (23 years for oil, 8.6 years for natural gas). The company has historically increased reserves and production volumes sustainably, despite operating under a challenging environment. Strong Capital Structure and Good Operating Performance: PAE’s leverage is low at approximately USD1.40 of debt per barrel of proved reserves as of March 2012. The company maintained a strong operating performance during the past year despite domestic price caps and a double-digit inflation rate. For the 12 months ended March 2012, EBITDA was USD1.6 billion, sufficient to cover its USD1.0 billion capex. In the second half of 2012, EBITDA is expected to be negatively affected by the seize of PAE’s main producing field, Cerro Dragon, by some workers in June 2012. What Could Trigger a Rating Action Analysts Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Gabriela Curutchet +54 11 5235-8100 gabriela.curutchet@fitchratings.com Latin America High Yield November 8, 2012 Downgrade Triggers: Catalysts for a negative rating action include a material increase in the government’s interference in the sector, and a significant increase in debt levels without the associated revenue increase. Upgrade Triggers: A positive rating action seems unlikely due to the business environment in Argentina and the fact that PAE is rated one notch above the country ceiling. 185 Corporates Recovery Rating Using Fitch’s recovery rating methodology, bondholder recovery value was assessed using the liquidation value of reserves, in line with Fitch’s sector-specific rating recovery methodology for oil and gas, detailed in the special report “U.S. Exploration and Production Recovery Rating Methodology,” published March 20, 2008. Under this scenario, Fitch used a USD10/boe reserve value for the company’s proved reserves (1P). Due to existing price caps on natural gas, the Fitch-calculated recover analysis conservatively considers PAE’s oil reserves, which produced USD9.6 billion in gross liquidation value prior to administrative claims and concession payments to junior claimants. The model assumes a standard 10% administrative claims adjustment and 5% concession to junior claimants. PAE’s senior unsecured notes qualify for an ‘RR3’ (+1 notching) relative to the IDR, so the senior unsecured rating is notched one level above the IDR. The recovery rating for PAE’s debt instrument reflects Fitch’s expectation that the company’s creditors would have extremely high recovery expectations under normal circumstances — levels consistent with an ‘RR1’. The ratings were capped at ‘RR3’, which is one notch above the soft cap of ‘RR4’ for bonds issued by corporates domiciled in Argentina, which resulted in an issue rating of ‘BB–’/‘RR4’. Recovery Analysis Pan American Energy LLC (PAE) (USD Mil.) IDR: B+ Going Concern Enterprise Value LTM EBITDA as of March 31, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value — 0 — 0 — Liquidation Value Cash Accounts Receivable Inventory Value of 1P Oil Reserves Total Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total — — — — Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 8,667.0 — 8,667.0 433.4 8,233.7 Unsecured Priority Senior Unsecured Value Recovered 1,923.0 Lien 1,923.0 Recovery (%) 100 Concession Allocation (%) 100 — — — 9,630.0 9,630.0 Recovery Rating RR3 Advance Available to Rate (%) Creditors 0 — 80 — 50 — 100 9,630.0 9,630.0 Notching +1 9,630.0 963.0 8,667.0 Rating BB– Source: Fitch. Latin America High Yield November 8, 2012 186 Corporates Organizational Structure — Pan American Energy LLC Bridas Energy Holdings Ltd. 50% CNOOC International Ltd. 50% Bridas Corporation BP plc 60% 40% Pan American Energy LLC (Delaware) 1Q12 LTM EBITDA: USD1.6 Billion 1Q12 Consolidated Debt: USD 0.9 Billion TD/EBITDA (x): 1.2 100% 100% 90% Pan American Energy Holding Ltd. Pan American Energy LLC Sucursal Argentina Pan American Energy Chile Limitada 100% PAE E&P Bolivia Limited 1Q12 LTM EBITDA: USD1.2 Billion 1Q12 Consolidated Debt: USD1.9 Billion TD/EBITDA (x): 1.5 90% 1Q12: EBITDA xx 90% Million Pan American Fueguina S.A. Pan American Sur S.A. TD –Total debt. Source: Pan American Energy LLC and Fitch. Latin America High Yield November 8, 2012 187 Corporates Debt and Covenant Synopsis Pan American Energy LLC (PAE) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Pan American Energy LLC Sucursal Argentina Pan American Energy LLC April 23, 2010 May 7, 2021 Senior Unsecured Notes Consolidated debt to capitalization is not greater than 45%. EBITA to financial expenses not lower than 2.0x. Change of control clause at 101% of principal plus accrued and unpaid interest. N.A. The issuer and restricted subsidiaries may incur in permitted debt, subject to standard limitations, provided that following such transaction EBITA to financial expenses is not lower than 2.0x and consolidated debt to capitalization is not greater than 45%, and no event of default has occurred. The issuer and its restricted subsidiaries are allowed to incur in customary permitted liens, related to the normal course of business. If any event of default occurs and is continuing, the issuer is restricted to make certain payments including dividends. Default by the company or significant subsidiary on principal or interest of USD40 million or more. If any event of default occurs and is continuing the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. At any time the issuer may redeem the notes in whole but not in part at a price equivalent to the higher of 1) 100% of principal and 2) the present value of remaining principal and interest payments. Transactions between issuer and affiliates are permitted should they reflect market conditions and no event of default is occurring. Restrictions on merger or consolidation of issuer and subsidiaries. Exceptions require that the surviving entity expressly assumes the obligations of the company, no event of default occurs or is continuing, the company’s pro forma debt levels allow it to incur additional indebtedness, among others. N.A. Mandatory Redemption N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 188 Corporates Petroleos de Venezuela, S.A. (PDVSA) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B+ B+/RR4 Local Currency Long-Term IDR B+ National Long-Term Rating AAA(ven) IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Negative Long-Term Local Currency IDR Negative Financial Data PDVSA (USD Mil.) Total Equity Total Adjusted Debt Operating Revenue Net Income EBITDA Total Adjusted Debt/EBITDA (x) EBITDA/Interest Expense (x) 12/31/11 73,833 41,635 124,754 4,496 18,684 12/31/10 75,314 30,201 94,929 3,164 24,171 2.2 1.2 5.1 23.8 Linkage to Sovereign: Petroleos de Venezuela, S.A.’s (PDVSA) credit quality is inextricably linked to the Venezuelan government. It is a state-owned entity whose royalties and tax payments have historically represented more than 50% of the government’s revenues, and it is of strategic importance to the economic and social policies of the country. In 2008, the government changed PDVSA’s charter and mission statement to allow it to participate in industries that contribute to the country’s social development, including health care, education, and agriculture. Limited Transparency of Sovereign: The Venezuelan government displays limited transparency in the administration and use of government-managed funds, and in fiscal operations, which poses challenges to accurately assess the stance of fiscal policy and the full financial strength of the sovereign. As a direct by-product of being a state-owned entity, PDVSA displays similar characteristics, which reinforces the linkage of its ratings to the sovereign. Strong Stand-Alone Credit Profile: PDVSA continues to be an important player in the global energy sector. The company’s competitive position is strong and supported by its sizeable reported proven hydrocarbon reserves, strategic interests in international downstream assets, and private participation in upstream operations. The company also benefits from a strong balance sheet, which is in line with many of its competitors. These strong credit attributes are consistent with a higher rating category although sovereign-related risks offset the strength of the financial profile and constrain the rating to that of the sovereign. Solid Credit Metrics: PDVSA reported an EBITDA (after royalties and social expenditure which include most oil bartering agreements) and FFO of approximately USD18.7 billion and USD30.9 billion, respectively, as of year-end 2011. Total financial debt as of Dec. 31, 2011 increased to USD34.9 billion from USD24.9 billion as of 2010. The leverage level at 1.9x is low for the rating category, which is limited by the credit quality of the Venezuelan government. Capital expenditures continue to be high, totaling approximately USD77.3 billion over the past five years, which have somewhat offset declining production levels from existing fields. Analysts Lucas Aristizabal +1 312 368-3260 lucas.aristizabal@fitchratings.com Ana P. Ares +54 11 5235-8121 ana.ares@fitchratings.com Julio Ugueto +58 212 286-3232 julio.ugueto@fitchratings.com Latin America High Yield November 8, 2012 Large Hydrocarbon Reserves: PDVSA’s reported hydrocarbon reserves continue to increase, with proven hydrocarbon reserves of 331 billion barrels of oil equivalent (boe) (approximately 89% oil and 11% natural gas) and proven developed hydrocarbon reserves of 20 billion boe as of December 2011, representing a 15-year proven developed reserve life. Venezuela reported oil production of approximately 2.99 million barrels per day (bpd) during 2011. Reported production has declined by approximately 2% per annum on average over the last four years. Various independent reports have estimated that production levels are lower than reported by the company, which adds to risk and is incorporated into the ratings. What Could Trigger a Rating Action Key Rating Drivers: Catalysts for an upgrade include an upgrade to Venezuela’s sovereign rating, real independence from the government, and a sharp and extended commodity price upturn. Catalysts for a downgrade include a downgrade to Venezuela’s ratings, a substantial increase in leverage to finance capital expenditures or government spending, and/or a sharp and extended commodity price downturn. 189 Corporates Organizational Structure — Petroleos de Venezuela, S.A. Petroleos de Venezuela, S.A. 100% 100% PDVSA Petroleo S.A. Corporacion Venezolana de Petroleo, S.A. (CVP) 100% PDVSA Gas, S.A. 100% PDV Marina, S.A. 100% PDV Holding Inc. 100% Propernyn B.V. (Holland) 100% Propernyn N.V. (Curaçao) 100% PMI (Aruba) 100% 100% “Empresas Mixtas” (Light-Medium Crude Oil) Refineries (CITGO Petroleum Corporation) “Empresas Mixtas” (Extra Heavy Crude Oil) Crude and Gas Assets in Venezuela PMI (Panama) 100% 100% 100% PDV Europa B.V. (Holland) 50% Petromar (Aruba) 100% Refineria Isla 50% Hovensa LLC AB Nynas Petrolum (Sweden) Distribution Entities Assets in North America European and Caribbean Assets Other Assets Including Trading Companies (Latin America Caribbean) Source: Fitch and Petroleos de Venezuela, S.A. Latin America High Yield November 8, 2012 190 Corporates Debt and Covenant Synopsis Petroleos de Venezuela, S.A. (PDVSA) (Foreign Currency Notes) Overview Issuer Guarantors Documents Date Maturity Date Description of Debt Financial Covenants Consolidated Net Leverage (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration Restriction on Purchase of Notes Petroleos de Venezuela, S.A. (PDVSA) PDVSA Petróleo, S.A. April 4, 2007, Feb., 11, 2011, May 11, 2012 April 12, 2017; April 12, 2027; April 12, 2037; Nov. 2, 2017; May 17, 2035 Senior Unsecured Notes No material provision noted. No material provision noted. Not included in the indenture’s covenants. No material provision noted. PDVSA is not permitted to issue senior secured debt or to create any lien on any asset, property, or income without providing the same security to the existing notes. No material provision noted. If the issuer or any of its significant subsidiaries defaults on any indebtedness of at least USD100 million. If any event of default occurs and is continuing, the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Events of default include, but are not limited to failure to pay principal, interest of any additional amount on the notes; a default in the observance or performance on any covent and which default continues for a period of 60 days; defaults in any indebtedness or judgments against the issuer or significant subsidiaries of at least USD100 million. The issuer is allowed to redeem the notes in whole or in part at a preset redemption price. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: PDVSA and Fitch Ratings. Latin America High Yield November 8, 2012 191 Corporates Financial Summary Petroleos de Venezuela S.A. (PDVSA) (USD Mil.) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2007 2008 2009 2010 2011 28,310 28,310 29.42 29.42 12.02 (12) 11.49 21,232 21,232 16.92 16.92 17.75 (4) 14.88 11,065 11,065 14.99 14.99 11.42 (14) 6.02 24,171 24,171 25.46 25.46 15.55 (2) 4.23 18,684 18,684 14.98 14.98 29.93 (6) 6.03 24.39 76.51 76.51 8.72 8.72 24.39 (3) (2.00) 0.32 21.30 27.57 27.57 8.60 8.60 21.30 (2) 0.24 0.91 25.04 23.49 23.49 3.23 3.23 25.04 (3) (1.00) 0.51 16.15 23.79 23.79 5.23 5.23 16.15 — 1.09 0.99 9.52 5.14 5.14 3.10 3.10 9.52 (1) 0.72 0.69 2.11 0.57 0.39 0.67 0.50 3.87 0.40 0.18 1.27 0.71 0.50 0.98 0.77 4.95 — 0.11 2.45 1.94 1.31 2.61 1.98 2.58 — 0.14 1.84 1.03 0.78 1.25 1.00 4.38 — 0.14 1.20 1.87 1.41 2.23 1.77 12.14 — 0.07 107,672 4,880 2,877 13,129 16,006 — 16,006 2,998 19,004 56,062 75,066 135,190 4,483 1,698 13,418 15,116 — 15,116 5,753 20,869 71,513 92,382 149,570 6,981 2,956 18,489 21,445 — 21,445 7,479 28,924 74,389 103,313 151,765 6,017 3,604 21,346 24,950 — 24,950 5,251 30,201 75,314 105,515 182,154 8,610 2,396 32,496 34,892 — 34,892 6,743 41,635 73,883 115,518 8,656 (4,482) 4,174 — (12,852) (3,037) (11,715) 756 (1,091) 13,093 — — 1,043 15,628 1,077 16,705 — (18,413) (2,953) (4,661) 1,242 1,364 (1,772) 5,000 25 1,198 11,323 (3,428) 7,895 — (15,333) (2,948) (10,386) (14) 34 10,361 2,000 503 2,498 15,391 (2,748) 12,643 — (12,824) (1,803) (1,984) (454) (379) 3,367 — (1,514) (964) 30,946 (18,554) 12,392 — (17,908) (2,357) (7,873) (15) 4,195 6,213 — 73 2,593 96,242 (3) 24,292 370 — 6,273 125,499 30.40 16,022 770 — 9,491 73,819 (41) 5,271 471 — 4,394 94,929 28.60 18,134 1,016 — 3,164 124,754 31.42 11,813 3,633 — 4,496 Source: PDVSA. Latin America High Yield November 8, 2012 192 Corporates Rede Energia S.A. Centrais Elétricas do Pará S.A. (Celpa) and Centrais Elétricas Matogrossenses S.A. (Cemat) Full Rating Report Key Rating Drivers Ratings Rede Energia S.A. (Rede) Foreign/Local Currency IDR Long-Term National Rating Perpetual Notes USD575 Mil. Debentures due 2015 RD RD(bra) C/RR4 C(bra) Celpa Foreign/Local Currency IDR Long-Term National Rating Senior Unsecured Notes D D(bra) C/RR4 Cemat Foreign/Local Currency IDR Long-Term National Rating RD RD(bra) IDR – Issuer default rating. RD – Restricted default. Financial Data Rede Energia S.A. Consolidated (BRL Mil.) Net Revenues EBITDA Funds from Operations Total Adjusted Debt Cash and Marketable Securities Total Adjusted Debt/EBITDA (x) Net Adjusted Debt/ EBITDA (x) 6/30/12 12/31/11 8,010 7,782 1,226 1,397 1,119 8,088 871 8,390 446 686 6.6 6.0 6.2 5.5 Celpa Under Bankruptcy Protection: The ratings of Centrais Elétricas do Pará S.A. (Celpa), a subsidiary of Rede Energia S.A. (Rede), reflect its bankruptcy protection filing on Feb. 28, 2012. The company is discussing alternatives to solve its financial difficulties. Equatorial Energia S.A. (Equatorial), a holding company in the power sector, has announced a proposal for acquiring a controlling stake in Celpa. The transaction is subject to various precedent conditions, including, among others, a recovery plan under terms and conditions acceptable to Equatorial. Rede’s and Cemat’s Ratings Affected by Celpa: Rede’s and Centrais Elétricas Matogrossenses S.A.’s (Cemat) already tight liquidity positions were further weakened by Celpa’s default. Both Rede and Cemat extended the maturity of some of their financial obligations, including some debenture issues, which resulted in a significant change in the original contractual terms. These changes were aimed at avoiding a very likely event of default and led to downgrades of their issuer default ratings (IDRs) to the restricted default (RD) category from ‘C’. Difficulties to Meet Debt Service: Rede Energia, the holding company, will be challenged to obtain a sustainable capital structure in the long term. The group, on a consolidated basis, has failed to grow operational cash flow to the expected extent in the last few years and has faced pressure from its sizeable planned investments in the short to medium term. The company depends on dividends from its subsidiaries, which have not been sufficient to meet its debt service. Financial Challenges: Fitch believes that the extension of debt repayment schedules in and of themselves would not be sufficient to improve the group’s financial situation. Only restructuring measures, such as a capital injection or the sale of a material amount of assets would place the holding company and the group in a sustainable credit position. Operational Challenges: Although Rede has had increases in energy sales in the last few years, following the growth potential of its concession areas, the group faces serious challenges, including high energy losses, especially for Celpa. Reported losses by this subsidiary are above the standards set by the regulatory agency, negatively affecting its operational cash flow. The third tariff review cycle for the Brazilian energy distribution companies is also a challenge for the group since the new rules should pressure its consolidated operational cash flow. What Could Trigger a Rating Action Analysts Renata Pinho +55 11 4504-2207 renata.pinho@fitchratings.com Mauro Storino +55 11 4503-2625 mauro.storino@fitchratings.com Latin America High Yield November 8, 2012 Key Rating Drivers: A positive rating action could be driven by restructuring measures, such as a relevant capital injection and/or the sale of assets that allowed the group to reduce debt to a level commensurate with its cash flow generation capacity. In addition to debt reduction, the company would need a more manageable debt amortization schedule to warrant a positive rating action. 193 Corporates Recovery Rating Fitch has performed a liquidation analysis for Rede in the event of bankruptcy. It has also estimated the enterprise valuation in the event of financial distress. Under this scenario, a conservative multiple of EBITDA of 5.0x was applied. The bespoke analysis suggests a higher recovery level of ‘RR3’ for the unsecured debt. The rating has been capped at ‘RR4’, which is the recovery rating cap for Brazilian issuers. The cap reflects concern about the bankruptcy laws and the application of the law. A recovery rating of ‘RR4’ indicates that Rede’s creditors should have average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. Recovery Analysis Rede Energia S.A. (BRL Mil.) Going Concern Enterprise Value June 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 1,226.5 0.0 1,226.5 5.0 6,132.5 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 1,231.8 — 600.0 1,831.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 6,132.5 613.2 5,519.3 Liquidation Value Cash A/R Inventory Net PPE Total 446.0 1,830.0 54.0 2,304.0 4,634.0 Advance Rate 0 80 50 20 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Available to Creditors — 1,464.0 27.0 460.8 1,951.8 5,690.3 1,818.0 3,872.3 193.6 3,678.6 Distribution of Value Secured Priority Secured Unsecured Priority Senior Unsecured Lien 1,911.0 Lien 6,177.0 Value Recovered 1,911.0 Value Recovered 3,608 Recovery (%) 100 Recovery (%) 58 Concession Allocation (%) 100 Recovery Rating RR1 Recovery Ratinga RR4 Notching +4 Notching — Rating N.A. Rating RD a The Rede’s recovery rating has been capped at ‘RR4’. RD – Restricted default. Source: Fitch Ratings. Latin America High Yield November 8, 2012 194 Corporates Organizational Structure — Rede Energia S.A. (As of March 31, 2012) BNDESPAR DENERGE EEVP OUTROS 68.24% 4.11% 11.79% 15.86% Rede Energia (Holding) Public Company 100% 100.00% 10.11% EDEVPa CELPAa 99.98% QMRA REDE POWER (Holding) (Holding) 51.26% (Public Company) 39.92% REDECOMb REDESERVb CEMATa (Public Company) 100.00% CAIUAa TANGARA VALE DO VACARIA 60.48% 99.6% 99.5% 61.67% (Generation) (Cogeneration) 50.86% 39.77% CELTINSa 60.16% ENERSULa 91.45% EEBa 98.69% CNEEa 97.70% CFLOa aDistribution. bCommercialization and services. Source: Fitch and Rede Energia S.A. Latin America High Yield November 8, 2012 195 Corporates Debt and Covenant Synopsis Rede Energia S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amounts Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Total Debt/EBITDA (Maximum) Interest Coverage Ratio (Minimum) Acquisitions/Divestitures Change of Control Provision Limitations on Sales of assets or shares Rede Energia S.A. N.A. April 2, 2007 N.A. Perpetual Bonds USD575 Million (USD400 Million + USD175 Million) Less than 4.0x (The maximum amount of debt that the issuer and its subsidiaries may incur pursuant to this covenant shall not exceed, with respect to any outstanding debt, solely as a result of fluctuations in the exchange rate of currencies.) N.A. N.A. No later than 30 days following a change of control that results in a rating decline, the issuer will make an offer to purchase all outstanding notes at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase. The issuer shall not sell, lease, transfer, or otherwise dispose of any direct or indirect interest in the CELPA shares and CELTINS shares unless the following conditions are met: 1) it receives consideration at least equal to the fair market value of the shares and 2) at least 75% of the consideration is in the form of cash or cash equivalents. Debt Restriction Limitation on Liens N.A. Limitation on Sale and Leaseback Transactions N.A. Dividends and Other Payment Restrictions Limitation on Dividend and Other Rede Energia will not and will not permit any subsidiary to create or permit to exist or become effective any consensual Payments encumbrance or restriction on the ability of any significant subsidiary to 1) pay dividends or make any other distributions on its capital stock to the issuer or any subsidiary; 2) pay any indebtedness owed to the issuer or any subsidiary; 3) make loans or advances to the issuer or any significant subsidiary or 4) transfer any of its properties or assets to the issuer or any significant subsidiary. Others Limitation on Transactions with Affiliates With certain exceptions, the issuer shall not make any payment, or sell, lease, transfer, or dispose of any of its properties or assets or enter into any transaction or contract for the benefit of any affiliate. This covenant does not apply for cash management or other financial management functions. Limitation on Consolidation, Merger, With certain exceptions, the issuer will not consolidate with or merge with or convey, transfer, or lease all or substantially all of its Conveyance, Sale, or Lease assets to any person. Cross Acceleration Cross acceleration of other debt with a USD40 million threshold. N.A. Not applicable. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 196 Corporates Debt and Covenant Synopsis Centrais Elétricas do Pará S.A. (Celpa) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Description of Debt Amount Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Acquisitions/Divestitures Limitations on Sales of Assets or Shares Debt Restriction Limitation on Liens Limitation on Sale and Leaseback Transactions Restricted Payments Limitation on Restricted Payments Others Limitation on Transactions with Affiliates Celpa N.A. May 27, 2011 and June 3, 2016 Senior Unsecured Notes USD250 Million 4.0x up to June 30, 2013; 3.75x after June 30, 2013 but prior to June 30, 2014; 3.50x after June 30, 2014 but prior to June 30, 2015; 3.25x thereafter. With certain exceptions, the issuer and its subsidiaries shall not make any asset disposition. With certain exceptions, the issuer will not, and will not permit any of its restricted subsidiaries to issue, assume, or guarantee any debt secured by a lien upon any property or assets without effectively providing that the notes are secured equally and ratably with such debt so long as such debt is so secured. With certain exceptions, the issuer and its subsidiaries will not enter into any sale and leaseback transaction. Upon a restricted payment triggering event, the company will not 1) declare or pay any dividend or similar payments to the direct or indirect holders of its capital stock; 2) purchase, redeem, retire, or acquire any capital stock of the company; 3) purchase, redeem, or acquire prior to scheduled maturity, scheduled repayment, or scheduled sinking fund payment, any subordinated obligations; or 4) make any investment (other than a permitted investment) in any person. With certain exceptions, the issuer or its subsidiaries shall not make any payment, or sell, lease, transfer, or dispose of any of its properties or assets or enter into any transaction or contract for the benefit of any affiliate. With certain exceptions, the issuer will not consolidate with or merge with, or convey, transfer, or lease all or substantially all of its assets to any person. Cross acceleration of other debt with a USD25 million threshold. Limitation on Consolidation, Merger, Conveyance, Sale, or Lease Cross Acceleration N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 197 Corporates Financial Summary Rede Energia S.A (BRL Mil., Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 1,226,466 1,226,466 15.3 15.3 23.7 2.4 (83.3) 1,397,418 1,397,418 18.0 18.0 20.2 (3.4) (30.3) 1,218,147 1,218,147 17.8 17.8 11.3 (14.8) (14.5) 1,190,910 1,190,910 20.7 20.7 13.2 (7.3) 0.3 1,068,963 1,068,963 26.8 26.8 7.6 (28.2) 8.1 1.9 1.0 1.0 0.3 0.3 1.9 0.3 0.4 1.2 1.7 1.2 1.2 0.3 0.3 1.7 0.2 0.3 0.7 1.3 1.4 1.4 0.4 0.4 1.3 (0.0) 0.2 (0.1) 1.6 1.6 1.6 0.5 0.5 1.6 0.1 0.3 0.4 1.2 1.7 1.7 0.6 0.6 1.2 (0.3) (0.1) (0.1) 3.4 6.1 5.8 6.6 6.2 33 — 0.5 4.0 5.9 5.4 6.0 5.5 15 — 0.4 6.6 6.4 5.7 6.4 5.8 12 — 0.3 5.6 5.7 5.3 5.9 5.5 12 — 0.2 9.7 5.8 5.4 6.6 6.2 11 — 0.2 13,607,688 445,886 3,494,273 4,031,981 7,526,254 — 7,526,254 562,111 8,088,365 1,813,890 9,902,255 12,935,830 686,083 3,603,518 4,628,521 8,232,039 — 8,232,039 158,358 8,390,397 1,888,645 10,279,042 12,640,339 759,663 2,279,537 5,474,600 7,754,137 — 7,754,137 16,548 7,770,685 2,649,565 10,420,250 11,532,692 413,953 1,491,413 5,283,803 6,775,216 — 6,775,216 203,198 6,978,414 2,434,026 9,412,440 11,334,177 395,951 1,288,695 4,913,818 6,202,513 — 6,202,513 802,906 7,005,419 2,523,006 9,528,425 1,118,610 27,636 1,146,246 0 (948,466) (8,280) 189,500 0 3,226 (485,927) 0 (1,558) (294,759) 870,947 (160,291) 710,656 — (956,565) (19,008) (264,917) — (816) 193,704 — (1,551) (73,580) 277,469 (364,401) (86,932) — (849,229) (81,994) (1,018,155) — 4,568 728,503 630,794 — 345,710 483,599 (180,994) 302,605 — (699,779) (24,131) (421,305) — 1,711 437,596 — — 18,002 104,482 (172,704) (68,222) — (1,059,006) — (1,127,228) (30,596) 118,555 707,736 115,176 — (216,357) 8,009,871 — 743,051 1,231,785 0 (755,344) 7,782,422 13 923,636 1,210,388 — (688,035) 6,860,728 20 786,105 898,733 — (368,845) 5,740,957 44 788,474 758,635 — 8,282 3,995,756 21 727,728 620,260 — 205,338 Source: Fitch. Latin America High Yield November 8, 2012 198 Corporates Rodopa Industria e Comercio de Alimentos Ltda. Full Rating Report Key Rating Drivers Ratings Foreign and Local Currency Long-Term Issuer Default Rating (IDR) B– National Long-Term Rating BBB–(bra) Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Weak Cash Flow Generation: Rodopa’s ratings reflect a weak cash flow generation over the last three years due to high interest costs and large working capital needs. Also, the company’s consolidated free cash flow generation was further depressed by its investment program, which is expected to remain at an elevated level over the next three years. As a result, free cash flow is expected to be negative during 2012. Financial Data Forte (Consolidated) Net Revenues EBITDAR FFO Total Adjusted Debt Cash and Marketable Securities Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) Weak Business Profile: Rodopa Industria e Comercio de Alimentos Ltda. (Rodopa) operates in a very competitive market characterized by volatile earnings and low EBITDA margins. These risks are exacerbated by the company’s small operational base and its limited operational flexibility that relies on only four plants in three Brazilian states. The domestic market represents 80% of its revenues. Sanitary restrictions or cattle scarcity also tend to affect Rodopa’s business more than its larger competitors, which benefit from a more diversified operational base. LTM 6/30/12 889 76 (7) 12/31/11 820 72 1 201 165 37 36 2.6 2.3 2.2 1.8 Increasing Leverage: Rodopa’s leverage is moderate but it is expected to increase. Leverage, as measured by total adjusted debt/EBITDAR, was 2.6x as of the LTM ended June 30, 2012, while the company’s net adjusted debt/EBITDAR ratio was 2.2x. These metrics are strong for the current rating category. By the end of 2012, net adjusted debt/EBITDAR should rise to close to 2.5x, as the company will use its cash reserves and will further increase debt to finance planned investments and working capital. Tight Liquidity: Rodopa’s liquidity is limited and refinancing risk is high. As of June 30, 2012, consolidated cash and marketable securities covered only 23% of short-term debt. The ratings assume that the company will be successful in issuing long-term debt, which will be used to refinance a large portion of current short-term debt and provide liquidity for the company’s growth plans. Operational Improvement Expected: Fitch expects that Rodopa’s consolidated EBITDAR will continue to improve, led by increasing sales volumes and declining cattle prices, reflecting an improved cattle cycle in Brazil. The company’s EBITDAR has improved significantly over the last three years as a result of increased slaughtering capacity (25% since 2009) and the close of unprofitable operations. The EBITDAR margin also improved as a result of the gains of scale. What Could Trigger a Rating Action Failure to Issue Long-Term Debt: A failure to improve its debt amortization schedule, as expected by Fitch, may lead to a downgrade. Analysts Gisele Paolino +55 21 4503-2624 gisele.polino@fitchratings.com Viktoria Krane +1 212 908-0367 viktoria.krane@fitchratings.com Latin America High Yield November 8, 2012 Leverage Increase: Increased leverage over and above Fitch’s expectations, as a result of operational performance deterioration or unexpected cash outflow. Improved Operations and Capital Structure: The ratings may be positively affected by a sustained improvement in Rodopa’s business profile, combined with consistent improvements in both liquidity and debt amortization schedule, and the maintenance of conservative leverage. 199 Corporates Organizational Structure Bindilatti Family 100% 6% Forte Empreendimentos e Participações Ltda. 94% 100% Rodopa Indústria Comércio de Alimentos Ltda. 99% 50% Rodopa Finance Curtume Cassilândia Ltda. Lidera Source: Rodopa. Latin America High Yield November 8, 2012 200 Corporates Financial Summary — Forte Empreendimentos e Participações (BRL 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Average Return on Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 74,934 76,254 8.4 8.6 2.9 (8.3) 9.7 71,538 72,064 8.7 8.8 3.8 (8.8) 13.6 29,467 29,989 3.8 3.9 1.6 (5.9) 11.2 24,079 24,614 5.2 5.3 5.5 (1.7) 4.1 0.6 4.2 4.0 0.4 0.4 0.6 (0.3) (0.1) (3.2) 1.1 5.5 5.3 0.6 0.6 1.1 (0.5) (0.2) (1.3) 0.5 3.6 3.4 0.4 0.4 0.5 (0.5) (0.2) (2.7) 2.7 6.3 5.6 1.4 1.4 2.5 (0.2) (0.0) 0.1 16.2 2.6 2.1 2.6 2.2 12 0.8 11.3 2.3 1.8 2.3 1.8 11 0.6 18.4 2.8 2.0 2.8 2.0 17 0.7 1.7 0.7 0.5 0.8 0.6 33 0.8 0.7 502,240 37,137 160,259 34,628 194,887 194,887 6,600 201,487 224,847 426,334 472,860 35,518 105,995 59,238 165,233 165,233 2,630 167,863 219,879 387,742 358,621 25,174 61,937 20,836 82,773 82,773 2,610 85,383 198,158 283,541 295,227 3,952 13,235 2,805 16,040 16,040 2,675 18,715 180,839 199,554 314,984 2,824 5,076 1,903 6,979 6,979 8,145 15,124 169,051 184,175 (6,836) (44,566) (51,402) 0 (15,858) (6,526) (73,786) 0 0 89,259 0 354 15,827 1,203 (38,736) (37,533) 0 (27,867) (6,716) (72,116) 0 0 82,460 0 0 10,344 (4,105) (29,220) (33,325) 0 (12,192) 0 (45,517) 0 0 66,739 0 0 21,222 6,525 (5,481) 1,044 0 (9,026) 0 (7,982) 0 0 9,110 0 0 1,128 0 888,791 (13) 66,651 17,927 1,320 21,135 820,295 7 63,718 13,118 526 28,437 768,195 67 46,018 8,223 522 21,171 461,108 — 19,310 3,840 535 7,177 0 Source: Rodopa and Fitch. Latin America High Yield November 8, 2012 201 Corporates Financial Summary — Rodopa Industria e Comercio de Alimentos Ltda. (BRL 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Average Return on Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 70,972 72,292 8.2 8.4 0.8 (8.6) 13.2 66,563 67,089 8.3 8.3 1.8 (9.0) 17.6 27,476 27,998 3.8 3.9 2.0 (6.2) 15.6 23,823 24,358 5.2 5.3 4.2 (1.4) 8.0 19,194 20,823 3.8 4.2 22.2 1.6 6.4 0.1 4.0 3.8 0.4 0.4 0.2 (0.3) (0.1) (3.8) 0.4 5.1 4.9 0.6 0.6 0.5 (0.5) (0.2) (1.6) 0.5 3.3 3.2 0.4 0.4 0.5 (0.5) (0.2) (2.6) 1.6 6.2 5.6 1.4 1.4 1.5 (0.1) 0.0 (1.3) 16.6 12.0 6.5 2.7 2.4 8.7 1.4 1.8 1.8 70.9 2.8 2.3 2.9 2.4 12 — 0.8 27.8 2.6 2.0 2.6 2.1 10 — 0.6 20.4 3.4 2.5 3.4 2.5 14 — 0.7 4.7 1.2 1.0 1.3 1.1 16 — 0.5 1.0 1.0 0.9 1.3 1.2 12 — 0.3 437,690 36,355 159,708 38,061 197,769 — 197,769 10,560 208,329 177,813 386,142 407,402 34,763 105,903 64,419 170,322 170,322 2,630 172,952 170,593 343,545 291,178 25,013 61,933 31,098 93,031 93,031 2,610 95,641 144,322 239,963 226,653 3,275 13,226 14,886 28,112 28,112 2,675 30,787 123,913 154,700 211,353 2,732 5,423 14,403 19,826 19,826 8,145 27,971 98,289 126,260 (16,310) (41,247) (57,557) 0 (15,298) (1,442) (74,297) (396) 1,098 88,709 0 0 15,114 (7,418) (36,707) (44,125) 0 (27,232) (1,442) (72,799) (396) 588 82,357 0 0 9,750 (4,057) (28,131) (32,188) 0 (12,290) (529) (45,007) 0 0 66,745 0 0 21,738 2,177 (5,164) (2,987) 0 (2,333) (974) (6,294) 372 0 6,465 0 0 543 24,851 (1,479) 23,372 0 (13,079) (2,203) 8,090 0 (500) (6,428) 0 0 1,162 864,554 6 65,039 17,927 1,320 22,105 806,432 11 61,127 13,118 526 27,713 726,056 57 46,103 8,223 522 20,938 462,226 (8) 20,781 3,840 535 8,859 500,706 39 17,816 1,595 1,629 6,148 Source: Rodopa and Fitch. Latin America High Yield November 8, 2012 202 Corporates SANLUIS Rassini S.A. de C.V. SANLUIS Rassini Full Rating Report Key Rating Drivers Ratings Foreign Currency Issuer Default Rating Local Currency Issuer Default Rating Cyclical Industry Affects Financial Profile: SANLUIS Rassini, S.A. de C.V.’s (SLR) ratings reflect the cyclicality of the industry, its high customer dependence, as well as the company’s history of debt restructurings. The company restructured its debt in 2010–2011. This was similar to other auto suppliers, as a steep decline in volumes during 2008–2009 eroded cash generation and increased leverage. B B Rating Outlook Stable Financial Data SANLUIS Corporacion S.A.B. de C.V. (MXN Mil.) Revenue EBITDA EBITDA Margin (%) Total Debt Debt/EBITDA (x) EBITDA/Interest Expense (x) LTM 6/30/12 2011 9,615,513 9,353,398 1,271,994 1,255,488 13.2 13.4 3,542,599 3,500,767 2.8 2.8 3.3 3.4 Solid Business Position: SLR, a subsidiary of SANLUIS Corporacion, S.A.B. de C.V. (SLC), manufactures suspension and brake system components for light and heavy vehicles and has a leading position in North America and an important presence in Brazil. The positive momentum in the North American market and the stabilization in the Brazilian heavy trucks segment are factors that should benefit the company’s cash flow in the near term and should further strengthen its financial profile. Concentration of Operations: SLR’s customer base is concentrated. Detroit’s three original equipment manufacturers (OEMs) represent approximately 60% of total revenues. In 2011, North America represented 62% of total SLC revenues and 59% of its consolidated EBITDA. The company’s main product line, leaf springs, accounted for more than 70% of total sales in 2011. Fitch expects these values to remain relatively stable in the next few years. Low-Cost Structure Provides Flexibility: During the latest industry downturn, SLR rationalized its operations and reduced the breakeven point from historical levels. Suspension customers’ long-term contracts provide raw material pass-through to prices and management has implemented initiatives to maintain plant efficiency and productivity. These actions, in conjunction with volume recovery, have resulted in EBITDA margins between 12%–14% during 2010 and the first half of 2012. However, the company’s business nature is closely dependent on volumes and industry cyclicality. Moderate Leverage After Debt Restructuring: The company’s debt restructuring process, which was completed in 2010, included the rescheduling of the maturity of USD142 million of secured bank loans at the North America Suspension Group level until 2014. In 2011, the group also exchanged USD237 million of the old SANLUIS Co-Inter (SISA) senior notes and mandatory convertible debentures for USD61.5 million of guaranteed notes due 2017, and USD14.5 million of new SISA Notes due 2020 plus 30.4 million of SLC shares. This resulted in a debt reduction to USD260 million from USD420 million. As of June 30, 2012, on a consolidated basis, SLC’s total debt-to-EBITDA ratio was 2.7x and its net debt-to-EBITDA ratio was 2.3x. Analysts Alberto de los Santos +52 81 8399-9100 alberto.delossantos@fitchratings.com Velia P. Valdés +52 81 8399-9100 velia.valdes@fitchratings.com Latin America High Yield November 8, 2012 What Could Trigger a Rating Action Operating Pressures Affecting Credit Metrics: Negative rating actions could result from a combination of lower volume sales and profitability as a result of a sharp U.S. recession and/or the loss of customers, which in turn translates to increased leverage above expected levels. Significant and Sustained Improvement in Leverage: Conversely, positive rating actions could be taken if the company consistently maintains leverage levels below 2.5x in conjunction with a strong liquidity profile and positive free cash flow generation. 203 Corporates Organizational Structure — SANLUIS Corporation, S.A.B. de C.V. (USD Mil., As of June 31, 2012) SANLUIS Corporation, S.A.B. de C.V. Euro Commercial Paper Eurobond 7% Sr. Notes due 2017 Total Debt 5.4 2.3 65.8 73.5 100% SANLUIS Co-Inter S.A. (SISA) 7% Notes due 2020 14.3 100% SANLUIS Rassini, S.A. de C.V. (SLR) 100% 100% Suspension Group Brake Group Revolving North America Suspension Group RCA due 2014 124.9 100% 51% 21.8 Brazil Suspension Group WC Lines Term Loan 2013 19 RCA – Restructured credit agreement. Note: Total consolidated debt is USD253.5 million. Source: Company filings, Fitch Ratings. Latin America High Yield November 8, 2012 204 Corporates Financial Summary SANLUIS Corporation, S.A. de C.V. (MXN Mil., Fiscal Years End Dec. 31) LTM 6/30/12 2011 2010 2009 2008 1,271,994.0 1,271,994.0 13.23 13.23 23.79 6.05 7.32 1,255,488 1,255,488 13.40 13.40 18.20 2.80 54.80 1,057,592 1,057,592 13.90 13.90 20.60 3.90 29.30 502,823 502,823 9.20 9.20 13.30 (0.80) (22.50) 434,287 434,287 6.20 6.20 5.10 2.60 (27.10) 3.9 3.3 3.3 1.2 1.2 3.9 0.9 1.4 2.8 2.9 3.4 3.4 1.3 1.3 2.9 0.7 1.0 2.3 2.7 2.6 2.6 0.4 0.4 2.7 0.2 0.3 2.9 1.7 1.4 1.4 0.2 0.2 1.7 0.1 0.2 0.7 0.7 1.2 1.2 0.6 0.6 0.7 0.8 1.3 1.9 2.3 2.8 2.4 2.8 2.4 11.8 0.2 3.3 2.8 2.6 2.8 2.6 9.1 0.2 4.1 4.3 4.0 4.3 4.0 10.9 0.6 4.9 6.1 5.7 6.1 5.7 12.0 0.9 12.5 7.2 6.5 7.2 6.5 12.4 0.1 Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital 8,940,453 507,245 682,248 2,860,351 3,542,599 3,542,599 0 3,542,599 2,797,306 6,339,905 8,368,745 297,232 577,999 2,922,768 3,500,767 3,500,767 0 3,500,767 2,346,960 5,847,727 7,539,293 259,129 2,574,292 1,926,792 4,501,084 4,501,084 0 4,501,084 778,915 5,279,999 7,129,619 173,171 2,840,659 202,802 3,043,461 3,043,461 0 3,043,461 1,572,536 4,615,997 7,060,969 323,500 324,890 2,817,622 3,142,512 3,142,512 0 3,142,512 1,781,108 4,923,620 Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash 1,119,703 (215,339) 904,364 0 (322,993) 0 581,371 0 (53,068) (37,415) 667 (226,535) 265,020 699,063 (224,122) 474,941 0 (210,282) 0 264,659 0 871 (15,639) 667 (212,455) 38,103 677,264 (221,585) 455,679 0 (159,537) 0 296,142 0 11,384 (38,858) 0 (182,710) 85,958 244,775 (135,105) 109,670 0 (152,116) 0 (42,446) 0 26,917 (114,690) 0 (20,110) (150,329) (106,498) 503,951 397,453 0 (213,548) 0 183,905 0 19,919 (134,367) 0 (64,876) 4,581 Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Continued on next page. Source: Company filings and Fitch calculations. Latin America High Yield November 8, 2012 205 Corporates Financial Summary SANLUIS Corporation, S.A. de C.V. (Continued) (MXN Mil., Fiscal Years End Dec. 31) Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 6/30/12 2011 2010 2009 2008 9,615,513 9,353,398 22.7 951,221 364,441 0 856,617 7,620,995 39.6 781,814 409,628 0 344,272 5,458,946 (21.5) 282,220 370,117 0 (377,941) 6,957,807 (13.0) 189,468 357,550 0 (536,526) — 951,604 388,815 0 179,094 Source: Company filings and Fitch calculations. Latin America High Yield November 8, 2012 206 Corporates Servicios Corporativos Javer, S.A.P.I. de C.V. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B+/RR3 Local Currency Long-Term IDR B Rating Outlooks Long-Term Foreign Currency IDR Negative Long-Term Local Currency IDR Negative National Long-Term Rating Negative Financial Data Servicios Corporativos Javer, S.A.P.I. de C.V. (MXN Mil.) Revenue EBITDA EBITDA Margin (%) FCF FCF Margin (%) Cash Short-Term Debt Total Adjusted Debt Total Adjusted Debt/EBITDA (x) Total Adjusted Net Debt/EBITDA (x) 6/30/12 5,394 982 12/31/11 4,719 902 18.2 125 2.3 363 57 3,764 19.1 (390) (8.3) 416 108 3,865 3.8 4.3 3.5 3.8 High Leverage: Javer’s total adjusted debt has increased in the past 18 months by 45% to MXN3.8 billion from MXN2.6 billion. The increase primarily reflected the company’s large investments during 2011 in working capital, as the company increased the size of its inventories. Positively, Javer has no significant debt payments due during the next two years. Modest Change in FCF in 2012: Javer’s cash flow has begun to improve following its build-up of working capital during 2011 that resulted in a negative FCF of MXN390 million. During the LTM ended June 30, 2012, Javer’s FCF was positive MXN125 million. This was a result of slower growth in units, an improvement in the collection process, and more moderate requirements in inventories. Recovery in Margins Expected in the Second Half of 2012: Javer’s EBITDA margin was 15% during the first half of 2012, which is below its normal average. The decline in margins was due to its product mix being more oriented to the low-income segment in order to take advantage of available subsidies through CONAVI. Margins are expected to improve for the second half of the year, as the company product mix shifts slightly to higher end customers. Sector’s Mortgage Origination Remains Stable: INFONAVIT’s total number of loans granted was 276,856 during the first half of 2012, which represents 57% of INFONAVIT’s 2012 target. Two factors that could limit the sector’s growth during the second half of 2012 are the availability of subsidies, as 72% of the annual target amount was already allocated by CONAVI and FOMHAPO during the first-half 2012, and potential delays in the origination process due to new procedures being implemented (scoring system and credit bureau) by the government agencies for mortgage origination. Large Regional Player with Limited Diversification: Javer is one of the five largest players in the Mexican homebuilding industry with total annual units sold around 18,000 units. The company’s operations in the state of Nuevo Leon represent about 75% of its unit sales. This concentration increases Javer’s dependence upon specific local and municipal governments to secure land and permits. Positively, the company accounts for about 15% of the mortgages granted by Instituto del Fondo Nacional para la Vivienda de los Trabajadores (Infonavit) in Nuevo Leon. What Could Trigger a Rating Action Analysts José Vértiz +1 212 908-0641 jose.vertiz@fitchratings.com Indalecio Riojas +52 81 8399-9108 indalecio.riojas@fitchratings.com Latin America High Yield November 8, 2012 FCF Generation Is Main Driver: Javer’s leverage increased significantly in 2011. The Negative Outlook reflects the view that continued high and negative FCF levels — similar to the levels reached during 2011 — in 2012 would fail to reduce leverage levels to those consistent with the rating category. Weaker liquidity, as reflected by a decreased cash position or higher short-term debt levels, would be seen as negative to credit quality and could also lead to a downgrade. Additional threats to the rating category include a decline in government funding programs or an erosion of the company’s market position. Conversely, better operational performance, resulting in the expectation that total adjusted debt to EBITDA would remain below 4.0x over time, could trigger a revision of the Rating Outlook to Stable 207 Corporates Recovery Rating Javer’s recovery ratings reflect Fitch’s belief that under a bankruptcy scenario the company’s enterprise value, and hence recovery rates for its creditors, would be maximized through a liquidation scenario rather than a restructuring scenario (as a going concern). Under this scenario, Fitch applies the industry’s standard discount rates to the company’s cash, accounts receivable, and net PP&E of 0%, 80%, and 20%, respectively. In the case of inventories, the industry’s standard discount rate is 55%. However, for this specific case Fitch utilizes 45%, which reflects the fact that approximately 50% of the company’s long-term inventories included land from third parties being held through land trust agreements. The ‘B+/RR3’ rating assigned to the senior notes reflects good recovery prospects in the range of 50%–70% given default. Recovery Analysis Servicios Corporativos Javer, S.A.P.I. de C.V. (MXN Mil., As of June 30, 2012) Enterprise Value (As of June 30, 2012) EBITDA EBITDA Discount (%) Distressed EBITDA Market Multiple Enterprise Value Interest Expense Rent Expense Maintenance Capital Expenditures Principal Amortization (Next 12 Months) Distribution of Value by Priority Greater of Enterprise or Liquidation Value Less Administrative Claims Less Concession Payments Adjusted Value Issuer Default Rating Senior Unsecured Amount Outstanding and Available R/C 3,579 982 40 589 3.5 2,061 Liquidation Value Cash Accounts Receivable Inventory PP&E, Net Total Balance Recovery Rates (%) 363 0 1,753 80 3,685 45 267 20 6,067 Available to Creditor 1,402 1,658 53 3,114 3,114 311 0.0 2,802 Value Recovered 2,617 Recovery Rate (%) 73 ‘RR’ Rating RR3 Notching 1 Credit Ratings B B+ Note: According to Fitch Ratings’ country-specific treatment of recovery ratings, Mexico has a soft cap at ‘RR3’, which results in a maximum one-notch benefit over the issuer default rating. Source: Javer’s financial statements and Fitch Ratings. Latin America High Yield November 8, 2012 208 Corporates Organizational Structure — Servicios Corporativos Javer, S.A.P.I. de C.V. (Javer) (As of June 30, 2012) Proyectos del Noreste, S.A. de C.V. Southern Cross Designees (40.7%), Evercore Designee (10.7%), and Arzentia (8.5%) Promotora de Proyectos Inmobiliarios Turin, S.A. de C.V. 38.0% 2.0% 60.0% Servicios Corporativos Javer, S.A.P.I. de C.V. (Javer) USD270 Mil. Senior Notes Due 2021a 99.9% Impulsora de Viviendas Javer S.A. de C.V., SOFOM, E.N.R. 99.9% Casas Javer S.A. de C.V. 99.9% Construccion de Viviendas Javer S.A. de C.V. 99.9% Casas Consentidas Javer, S.A. de C.V., SOFOM E.N.R. 99.9% Servicios Administrativos Javer, S.A. de C.V. 99.9% Urbanizaciones Javer S.A. de C.V. 99.9% Hogares Javer, S.A. de C.V. aEach of Javer’s subsidiaries guarantees the notes jointly and severally on a senior unsecured basis. Source: Javer. Latin America High Yield November 8, 2012 209 Corporates Debt and Covenant Synopsis Servicios Corporativos Javer, S.A.P.I. de C.V. (Javer) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Ranking Financial Covenants Limitation on Incurrence of Additional Indebtedness Servicios Corporativos Javer, S.A.P.I. de C.V. (Javer) Payment of principal of, premium, if any, and interest on the notes is guaranteed jointly and severally on a senior unsecured basis by each of the following Javer subsidiaries (Guarantors): Servicios Administrativos Javer, S.A. de C.V.; Casas Javer, S.A. de C.V.; Hogares Javer, S.A. de C.V.; Viviendas Javer, S.A. de C.V.: Construcción de Viviendas Javer, S.A. de C.V.: Urbanizaciones Javer, S.A. de C.V., Impulsora de Viviendas del Noreste, S.A. de C.V.: Impulsora de Viviendas Javer, S.A. de C.V.: SOFOM, E.N.R., Desarrollos Integrales Javer S.A de C.V.; and Casas Consentidas Javer, S.A. de C.V., SOFOM, E.N.R. April 6, 2011 April 6, 2021 Senior Notes USD270 Million The notes and the guarantees rank equally in right of payment with all of the company and the subsidiary guarantors’ existing and future senior indebtedness; and senior in right of payment to all of the company and the subsidiary guarantors’ existing and future subordinated indebtedness. The notes and the guarantees will effectively rank junior in right of payment to all of the company and the subsidiary guarantors’ existing and future secured indebtedness with respect and up to the value of the assets securing such indebtedness. The notes and the guarantees will be structurally subordinated to all indebtedness (including trade payables) of the company’s non-guarantor subsidiaries. Furthermore, the notes and the guarantees will rank junior in right of payment to all obligations preferred by statute (such as tax or labor obligations). The company may incur in additional indebtedness if, among other conditions provided in the new indenture, the consolidated fixed coverage ratio is greater than 2.25 to 1.00. Permitted indebtedness includes indebtedness incurred by the company or any subsidiary guarantor under credit facilities (including construction bridge loans and other seller financing) in an aggregate principal amount at any time outstanding not to exceed the greater of USD50.0 million or 10.0% of consolidated tangible assets. Acquisitions/Divestitures Change of Control Provision Upon the occurrence of a change of control, the holders of the notes will have the right subject to certain exceptions to require the issuer to repurchase some or all of the notes at 101% of their principal amount, plus accrued and unpaid interest, if any, on the repurchase date. In connection with the company’s change of control occurred during 2009, the company completed a consent solicitation pursuant to a consent solicitation statement dated Oct. 28, 2009, requesting that holders of the outstanding notes as of a record date waive the change of control provisions of and consent to an amendment to the indenture governing the outstanding notes (together, the “Waiver and Amendment”). After receiving valid consents from holders of a majority in aggregate principal amount of the outstanding notes, the Waiver and Amendment was affected through the execution of a supplemental indenture, dated as of Nov. 9, 2009, to the indenture. Certain Covenants The indenture contains certain covenants that, among other things, limit the company’s ability and the ability of its subsidiaries to: (1) incur additional indebtedness; (2) pay dividends on the company’s capital stock or redeem, repurchase, or retire the company’s capital stock or subordinated indebtedness; (3) make investments; (4) create liens; (5) create any consensual limitation on the ability of the company’s restricted subsidiaries to pay dividends, make loans, or transfer property to the company; (6) engage in transactions with affiliates; (7) sell assets, including capital stock of the company’s subsidiaries; and (8) consolidate, merge, or transfer assets. If the notes obtain investmentgrade ratings from the rating agencies and no default has occurred and is continuing, the foregoing covenants will cease to be in effect with the exception of covenants that contain limitations on liens and on, among other things, certain consolidations, mergers, and transfer of assets for so long as each of the foregoing rating agencies maintains its investment grade rating. These covenants are subject to important exceptions and qualifications. Others Limitation on The company will not, and will not permit any of its restricted subsidiaries to, directly or indirectly, enter into any transaction or series of Transactions with Affiliates related transactions (including, without limitation, the purchase, sale, lease, or exchange of any property or the rendering of any service) with, or for the benefit of, any of its affiliates (each an “affiliate transaction”), unless: (1) the terms of such affiliate transaction are no less favorable than those that could reasonably be expected to be obtained in a comparable transaction at such time on an arm’s-length basis from a person that is not an affiliate of the company; (2) in the event that such affiliate transaction involves aggregate payments or transfers of property or services with a fair market value, in excess of USD5 million, the terms of such affiliate transaction will be approved by a majority of the members of the board of directors of the company; and (3) in the event that such affiliate transaction involves aggregate payments, or transfers of property or services with a fair market value, in excess of USD15 million, the company will, prior to the consummation thereof, obtain a favorable opinion as to the fairness of such affiliate transaction to the company and the relevant restricted subsidiary (if any) from a financial point of view from an independent financial advisor and file the same with the trustee. This restriction is subject to important exceptions and qualifications. Limitation on Javer will not, in a single transaction or series of related transactions, consolidate or merge with or into any person (whether or not the Consolidations or Mergers company is the surviving or continuing person), or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any restricted subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the company’s properties and assets (determined on a consolidated basis for the company and its restricted subsidiaries), to any person. This restriction is subject to several exceptions. Events of Default The main events of default are: (1) default in the payment when due of the principal of or premium, if any, on any notes, including the failure to make a required payment to purchase notes tendered pursuant to an optional redemption, change of control offer or an asset sale offer; (2) default for 30 days or more in the payment when due of interest, additional amounts or liquidated damages, if any, on any notes; (3) the failure to perform or comply with any of the provisions described under “Certain Covenants — Merger, Consolidation, and Sale of Assets”; and (4) the failure by the company or any restricted subsidiary to comply with any other covenant or agreement contained in the indenture or in the notes for 45 days or more after written notice to the company from the trustee or the holders of at least 25% in aggregate principal amount of the outstanding notes. Continued on next page. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Servicios Corporativos Javer, S.A.P.I. de C.V. and Fitch Ratings. Latin America High Yield November 8, 2012 210 Corporates Debt and Covenant Synopsis Servicios Corporativos Javer, S.A.P.I. de C.V. (Javer) (Continued) (Foreign Currency Notes) Others (Continued) Cross Default Acceleration Governing Law Optional Redemption Cross default when an uncured event of default occurs for debt of more than USD15 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. The indenture, the guarantees, and the notes will be governed by the laws of the state of New York. The company may, at its option, at any time on or prior to August 2014, use the net cash proceeds of certain equity offerings to redeem in the aggregate up to 35.0% of the aggregate principal amount of the notes, including any additional notes the company may issue in the future under the indenture, at a redemption price equal to % of the principal amount thereof, provided, that: (1) After giving effect to any such redemption at least 65.0% of the aggregate principal amount of the notes (including any additional notes) issued under the indenture remains outstanding; and (2) the company makes such redemption not more than 90 days after the consummation of such equity offering. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Servicios Corporativos Javer, S.A.P.I. de C.V. and Fitch Ratings. Latin America High Yield November 8, 2012 211 Corporates Financial Summary Servicios Corporativos Javer, S.A.P.I. de C.V. (MXN 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) 2008 2009 2010 2011 LTM Ended 6/30/12 1,100,650 1,100,650 24.61 24.61 21.32 (3.00) 47.51 1,090,334 1,090,334 22.11 22.11 22.20 13.63 40.47 878,795 878,795 18.80 18.80 19.84 (13.00) 10.45 902,227 902,227 19.12 19.12 17.66 (8.00) (2.00) 981,813 981,813 18.20 18.20 21.15 2.33 (1.00) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/ Debt Service Coverage Cash Flow from Operations/Capital Expenditures 2.28 3.17 3.17 0.92 0.92 2.28 0.19 2.57 3.33 3.33 1.83 1.83 2.57 1.68 1.71 2.06 2.06 1.97 1.97 1.71 — 1.87 1.83 1.83 1.50 1.50 1.87 0.17 2.18 1.95 1.95 1.75 1.75 2.18 1.12 0.49 (1.00) 3.03 6.90 0.74 (19.00) 0.86 (13.00) 1.77 8.40 Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt 3.05 2.20 1.88 2.20 1.88 14.53 0.35 3.12 2.41 1.67 2.41 1.67 12.98 0.1 3.56 2.96 2.40 2.96 2.40 16.34 0.01 4.19 4.28 3.82 4.28 3.82 15.28 0.03 3.42 3.83 3.46 3.83 3.46 14.46 0.02 Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital 5,138,574 350,041 845,512 1,578,316 2,423,828 2,423,828 2,423,828 1,299,826 3,723,654 5,205,461 805,927 267,918 2,357,190 2,625,108 2,625,108 2,625,108 1,164,193 3,789,301 5,876,704 491,939 19,428 2,581,131 2,600,559 2,600,559 2,600,559 1,085,405 3,685,964 7,195,147 415,721 108,377 3,756,076.31 3,864,453.31 3,864,453.31 3,864,453.31 1,356,510 5,220,963.31 6,668,372 363,226 57,307 3,706,350 3,763,657 3,763,657 3,763,657 1,437,753 5,201,410 Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash 446,310 (509,746) (63,436) (53,846) (117,282) (173) 422,371 (9,442) 295,474 513,387 424,774 938,161 (135,960) (130,000) 672,201 410,538 (586,000) (40,853) 455,886 304,361 (861,949) (557,588) (28,799) (586,387) (14,208) 333,663 (47,076) (314,008) 428,240 (790,972) (362,732) (26,954) (389,686) (58,550) 372,399 (8,461) (84,298) 595,680 (453,314) 142,366 (16,943) 125,423 (50,387) (87,562) 59,702 47,176 Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4,472,945 45 1,059,915 347,724 510,425 4,931,677 10 1,050,215 327,671 498,634 4,673,919 (5) 819,208 426,982 117,571 4,718,574 1 836,621 493,809 (19,637) 5,394,304 4 918,504 504,555 (7,522) Source: Company reports and Fitch’s calculations. Latin America High Yield November 8, 2012 212 Corporates Sidetur Siderurgica del Turbio, S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term Foreign Currency IDR B– Long-Term Local Currency IDR B– Sidetur Finance B.V. B–/RR4 National Long-Term Rating National Short Term Rating BB+(ven) F2(ven) IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Negative Long-Term Local Currency IDR Negative Financial Data Sidetur (LTM) Total Equity (USD Mil.) Total Debt (USD Mil.) Operating Revenue (USD Mil.) Net Income (USD Mil.) FCF Margin (%) ROAE (%) Total Debt to EBITDA (x) 3/31/12 9/30/11 137 125 80 83 451 355 47 3.0 35.0 37 (2.0) 28.0 1.1 1.3 Ongoing Expropriation Process: Siderurgica del Turbio, S.A.’s (Sidetur) ratings reflect the ongoing developments and uncertainty surrounding the expropriation of Sidetur’s steel mills, in particular the unknown dollar value that it will receive from the Venezuelan government for those assets. The ratings also take into consideration the uncertainty surrounding the timeliness of payment from the government, which could inadvertently lead to the change-ofcontrol clause being triggered. Higher than Average Recoveries: Recovery in the event of default could be above the ‘RR4’ level due to Sivensa’s strong reputation and conservative management, as well as the low level of debt in relation to the amount of funds the company is likely to receive from the government. The recovery was capped at the ‘RR4’ level due to concerns about creditor rights in Venezuela, as well as the application and legal enforceability of any claim. Please refer to Fitch’s criteria report, “Country-Specific Treatment of Recovery Ratings,” dated June 15, 2012 for more guidance on Fitch’s application of national recovery ratings. Shrinking Volumes Offset by Better Product Mix: Sidetur’s revenues and EBITDA reduced significantly as a result of lower sales volumes and price controls to USD355 million and USD62 million in fiscal 2011 from USD647 million and USD119 million in fiscal 2009, respectively. For the LTM to March 31, 2012, the company’s revenues improved to USD451 million, and EBITDA showed improvement due to better product mix with a higher amount of unregulated rebar products at USD74 million, with an EBITDA margin of 16%. Low Leverage Maintained: In spite of this decline in revenues, the company’s leverage remained low with its total-debt-to-LTM EBITDA ratio currently at 1.1x and 0.7x on a net cash basis, as of March 31, 2012. This compares favorably to 2.8x and 1.2x, respectively, in fiscal 2011. Total debt as of the same period was USD80 million compared to USD90 million in fiscal 2010, mainly comprising the outstanding portion of the USD100 million senior unsecured notes issued by Sidetur through its 100% owned subsidiary, Sidetur Finance B.V. in 2006. Minimal Cash Position: Sidetur’s cash position is at a historical low. Fitch partly attributes this to a change in cash management strategy related to the company’s expropriation. The company held USD32 million of cash and marketable securities as of March 31, 2012, a significant reduction on USD149 million held in fiscal 2008. USD7 million of the latest cash position was restricted cash, which guarantees a quote of capital and interest of the bonds. Sidetur has a manageable debt maturity schedule of USD5 million a year until 2016, providing headroom. Analysts Jay Djemal +1 312 368-3134 jay.djemal@fitchratings.com Julio Ugueto +58 212 286-3232 julio.ugueto@fitchratings.com Latin America High Yield November 8, 2012 What Could Trigger a Rating Action Expropriation of Company Assets: Sidetur’s ratings are dependent on the unfolding events surrounding the expropriation process. Sidetur’s ratings incorporate the expectation that the government of Venezuela works to avoid a situation whereby an international default occurs as a result of the nationalization process of Sidetur’s assets. Sidetur’s ratings therefore reflect Fitch’s current expectation of the unsecured notes at Sidetur Finance B.V. being prepaid. 213 Corporates Recovery Analysis Despite Sidetur’s bespoke recovery analysis indicating a recovery rating of ‘RR1’ for Sidetur’s USD100 million senior unsecured notes of which USD84 million is outstanding. Fitch’s “Country-Specific Treatment of Recovery Ratings” criteria published June 15, 2012 has been used to cap the rating at ‘RR4’ despite the bespoke analysis. In this criteria report, Venezuela is categorized as a Group D jurisdiction, which has a soft cap for recovery ratings at ‘RR4’. Recovery Analysis – Siderúrgica del Turbio, S.A. and Sidetur Finance B.V. (USD Mil.) Going Concern Enterprise Value March 31, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 74 50 37 4.0 147 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total 7 — 5 12 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Adminstrative Claims (%) Concession Allocation Adjusted Enterprise Value for Claims Distribution of Value Unsecured Priority Senior Unsecured Advance Rate Available to Creditors — 147 10 15 5 7 — 125 Lien 80 Value Recovered 80 Recovery (%) 100 Recovery Rating RR1 Notching +3 Rating BB– Source: Fitch. Latin America High Yield November 8, 2012 214 Corporates Financial Summary Sidetur (USD 000, Years Ended Sept. 30) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 3/31/12 2011 2010 2009 2008 73,695 73,695 16 16 24 3 35 61,743 61,743 17 17 25 (2) 28 32,732 32,732 9 9 1 7 16 119,468 119,468 18 18 34 (15) 10 141,532 141,532 23 23 25 (8) 68 40.9 58.3 58.3 11.8 11.8 40.9 2.2 7.3 42.3 37.9 46.0 46.0 9.7 9.7 37.9 (0.9) 3.7 19.1 0.3 4.6 4.6 2.1 2.1 0.3 2.1 5.3 5.2 4.4 6.6 6.6 3.2 3.2 4.4 (2.2) (0.6) 1.1 3.8 8.4 8.4 3.3 3.3 3.8 (0.7) 2.8 1.7 1.5 1.1 0.7 1.1 0.7 2.0 0.0 0.1 1.6 1.3 0.9 1.3 0.9 2.0 0.0 0.1 40.6 2.8 1.2 2.8 1.2 7 0.0 0.1 1.3 0.9 0.4 0.9 0.4 16 0.0 0.2 1.8 0.8 (0.2) 0.8 (0.2) 14 0.0 0.2 331,711 31,874 5,000 75,000 80,000 — 80,000 — 80,000 137,303 217,303 310,112 29,126 5,000 77,500 82,500 — 82,500 — 82,500 124,953 207,453 308,972 50,980 8,773 81,250 90,023 — 90,023 — 90,023 133,743 223,766 343,083 57,754 19,364 86,250 105,614 — 105,614 — 105,614 126,519 232,133 405,644 149,356 25,675 91,250 116,925 — 116,925 — 116,925 139,078 256,003 50,401 (1,643) 48,758 — (1,154) (34,883) 12,721 — — (5,426) — 3,499 10,794 49,494 746 50,240 — (2,632) (54,481) (6,873) — — (8,401) — (291) (15,565) (4,886) 42,348 37,462 — (7,154) (3,767) 26,541 — — (27,595) — 319 (735) 61,372 (53,608) 7,764 — (6,971) (100,364) (99,571) — — (14,689) — 22,658 (91,602) 47,352 6,554 53,906 — (31,210) (69,618) (46,922) — 55,350 14,442 — (14,273) 8,597 451,367 12 60,949 1,264 — 47,458 355,224 (2) 48,208 1,341 — 36,596 361,469 (44) 18,899 7,104 — 20,858 647,112 (7) 104,439 18,035 — 12,706 605,961 (29) 128,024 16,870 — 80,211 Source: Sidetur financial statements, Fitch calculations. Latin America High Yield November 8, 2012 215 Corporates Sifco S.A. Full Rating Report Key Rating Drivers Ratings Parent Subsidiary Credit Linkage Incorporated: Sifco S.A.’s ratings incorporate the close credit linkage of the company and its parent company, G. Brasil Participações (GB), which has a substantially weaker standalone credit profile. Foreign Currency Long-Term IDR Senior Unsecured B– B– Local Currency Long-Term IDR B– National Long-Term Rating BB(bra) IDR – Issuer default rating. High Leverage: Sifco’s leverage is high but improving. As of March 31, 2012, Sifco’s net debt/EBITDA ratio was 4.9x, an improvement from 5.6x in 2010. The decrease in leverage was primarily due to the closing of a commercial agreement with Dana Corporation (Dana) in 2011. The ratings incorporate the expectation that Sifco’s net leverage will remain in the 4.0x–5.0x range during the next 12 to 18 months. Rating Outlooks Long-Term Foreign Currency IDR Stable Long-Term Local Currency IDR Stable National Long-Term Rating Stable Financial Data Sifco S.A. (BRL Mil.) Revenue EBITDA CFFO Total Debt Cash and Marketable Securities Total Debt/EBITDA (x) Net Debt/EBITDA (x) 3/31/12 1,080 102 180 642 2010 777 86 100 606 144 6.3 4.9 122 7.0 5.6 Refinancing Risk a Concern: Sifco accounts for about 60% of GB’s consolidated debt. Sifco’s short-term debt is high in relation to total debt, accounting for about 42% of its total adjusted debt of BRL681 million at the end of 2011. Refinancing risk is high, as the company’s cash position of BRL144 million is low relative to BRL286 million of short-term debt as of March 31, 2012. Cash Flow Needs to Improve to Reduce Refinancing Risk: During the LTM ended March 31, 2012, Sifco’s CFFO was BRL180 million, while its FCF was BRL101 million. The agreement with Dana increased these figures, as did the incorporation of BR Metals for six months. Sifco generated BRL101 million of CFFO in 2010 and BRL87 million of FCF. Positive Free Cash Flow Expected: Despite the company’s volatile operating results, during the past years, CFFO had been positive, with margins at double digits, which has led to positive FCF. In the past, that FCF was used to support weaker sister companies through intercompany loans. The company’s recent bond issuance limits the amount of these loans to USD15 million. Fitch’s ‘B–’ rating of Sifco incorporates an expectation of positive FCF for the following three years due to lower capital expenditures levels and no dividend outflows. BR Metals Acquisition Forecasts Synergies for Sifco’s Operations: Sifco is well positioned as a tier-two regional player, with revenues of BRL1.08 billion and BRL777 million during the LTM ended March 31, 2012 and 2010, respectively. The company’s EBITDA improved to BRL102 million from BRL86 million during this time period. The incorporation of BR Metals results for the past six months was one of the factors that led to the change in revenues and EBITDA. Analysts Ingo Araújo +55 11 4504-2205 ingo.araujo@fitchratings.com Jose Vertiz +55 11 4504-2600 jose.vertiz@fitchratings.com Latin America High Yield November 8, 2012 Industry Cyclicality and Low Diversification Constrains Ratings: Automotive parts supply represents over 90% of Sifco’s sales. The automotive industry is highly cyclical, and the company’s high degree of exposure to the Brazilian market is a rating constraint despite positive prospects for the domestic automotive industry in the medium term. What Could Trigger a Rating Action GB’s Credit Profile Improvement: As the main constraint for the rating, an improvement in GB’s credit profile could trigger a positive rating action. Another downturn in this cyclical industry in the near term could lead to a negative rating action 216 Corporates Recovery Rating Sifco’s recovery rating of ‘RR4’ indicates an anticipated recovery for the company’s creditors in the range of 31%—50% of current principal and related interest in the event of default. The assigned recovery rating considers recovery of cash that is pledged in escrow accounts and fixed assets liens. Fitch has performed a liquidation analysis in the event of a bankruptcy, although this scenario seems unlikely. In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 5.1x distressed EBITDA multiple. This multiple is slightly more conservative than the current 5.8x multiple for U.S. auto suppliers. Recovery Analysis Sifco S.A. (BRL Mil.) Going Concern Enterprise Value March 30, 2012 LTM EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 102,398 25 76,798 5.1 391,672 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Liquidation Value Cash A/R Inventory Net PPE Total 143,974.0 142,745.0 98,416.0 556,427.0 941,562.0 Advance Rate 15 80 50 45 Available to Creditors 21,596 114,196 49,208 250,392 435,392 76,414 — 15,000 91,414 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 435,392 43,539 391,853 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (0%) Value to be Distributed to Senior Unsecured Claims 391,853 271,261 120,592 — 120,592 Distribution of Value Secured Priority Senior Secured Secured Lien 0.0 271,261.0 Unsecured Priority Senior Unsecured Lien 370,845.0 Value Recovered — 271,261.0 Value Recovered 120,592 Recovery (%) 0 100 Recovery (%) 33 Concession Allocation (%) 0 Recovery Rating — RR1 Recovery Rating RR4 Notching — +3 Rating — BB– Notching 0 Rating B– Source: Fitch Ratings. Latin America High Yield November 8, 2012 217 Corporates Latin America High Yield November 8, 2012 218 Corporates Debt and Covenant Synopsis Sifco S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amount Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Acquisitions/Divestitures Change of Control Provision Limitations on Sale of Assets or shares Sifco S.A. N.A. May 27, 2011 2016 Senior Unsecured Notes USD75 Million Less than 3.75x. Net debt-to-EBITDA ratio < than (i) 3.75 to 1.0 until March 31, 2012; (ii) 3.50 to 1.0 until March 31, 2013; (iii) 3.25 to 1.0 thereafter. No later than 30 days following a change of control that results in a rating decline, the issuer will make an offer to purchase all outstanding notes at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase. The merger, sale of assets or other transaction must not cause a default on the notes, and the issuer must not already be in default, unless the merger or other transaction would cure the default. Debt Restriction Limitation on Liens Liens in an aggregate principal amount not to exceed 10% of the issuer’s consolidated total assets. Liens to secure permitted affiliate guarantees. Dividends and Other Payment Restrictions Limitation on dividend and other payments The issuer will not and will not permit any subsidiary to create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any restricted subsidiary to (1) pay dividends or make any other distributions on its capital stock to the Issuer or any subsidiary; (2) pay any indebtedness owed to the issuer or any subsidiary; (3) make loans or advances to the issuer or any significant subsidiary or (4) transfer any of its properties or assets to the issuer or any significant subsidiary. Others Limitation on transactions with affiliates With certain exceptions, the issuer and subsidiary shall not make any payment, or sell, lease, transfer, or dispose of any of its properties or assets or enter into any transaction or contract for the benefit of any affiliate. No new intercompany loans to affiliates in excess of USD15 million. Limitation on Consolidation, Merger, With certain exceptions, the Issuer will not consolidate with or merge with or convey, transfer or lease all or substantially all of Conveyance, Sale or Lease its assets to any person. Cross acceleration Cross acceleration of other debt with a USD5 million threshold. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 219 Corporates Financial Summary Sifco S.A. (BRL 000, Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Average Return on Equity (%) LTM 3/30/12 2011 2010 2009 2008 102,398 102,398 9.5 9.5 20.4 9.4 (14.3) 104,596 104,596 9.8 9.8 19.8 13.6 (0.4) 86,205 86,205 11.1 11.1 18.0 11.2 8.6 37,088 37,088 8.5 8.5 10.9 16.7 26.7 86,211 86,211 13.8 13.8 21.6 4.3 (4.0) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures 2.2 1.3 1.3 0.3 0.3 2.2 0.5 0.9 2.3 2.4 1.4 1.4 0.3 0.3 2.4 0.6 1.1 3.5 2.9 1.7 1.7 0.3 0.3 2.9 0.5 0.9 7.4 3.4 2.1 2.1 0.4 0.4 3.4 1.0 1.9 5.2 6.3 4.7 4.7 0.8 0.8 6.3 0.4 1.0 1.6 Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt 3.8 6.3 4.9 6.3 4.9 12 0.4 3.9 6.5 4.9 6.5 4.9 11 0.4 4.2 7.0 5.6 7.0 5.6 10 0.4 6.5 10.3 8.0 10.3 8.0 5 0.2 2.6 3.5 2.8 3.5 2.8 7 0.3 1,491,355 143,974 285,758 356,348 642,106 642,106 0 642,106 190,795 832,901 1,510,217 166,625 288,104 393,217 681,321 681,321 0 681,321 205,387 886,708 1,046,040 122,084 237,764 368,282 606,046 606,046 0 606,046 196,231 802,277 723,445 85,727 74,650 307,643 382,293 382,293 0 382,293 156,722 539,015 732,947 58,710 90,318 213,667 303,985 303,985 0 303,985 227,780 531,765 93,831 86,499 180,330 0 (78,912) 0 101,418 (214) (80,205) (64,290) 0 2,529 (40,762) 102,268 102,189 204,457 0 (58,835) 0 145,622 (214) (121,138) 19,257 0 2,307 45,834 93,838 6,962 100,800 0 (13,690) 0 87,110 0 0 (52,887) 0 21 34,244 41,269 48,454 89,723 0 (17,366) 0 72,357 0 (6,245) (1,681) (36,360) (1,054) 27,017 96,731 (15,308) 81,423 0 (52,330) (2,500) 26,593 0 (1,396) 25,293 0 (6,042) 44,448 1,080,268 55,497 76,414 0 (13,684) 1,071,495 38 62,735 73,720 0 (877) 777,334 79 63,708 50,645 0 15,228 434,171 (30) (46,039) 17,551 0 51,288 624,368 12 70,016 18,300 0 (9,067) Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions. and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income Source: Fitch Ratings. Latin America High Yield November 8, 2012 220 Corporates Telecom Argentina S.A. (TEO) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR B Local Currency BB Long-Term IDR IDR Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Telecom Argentina S.A. (ARS Mil.) Revenue EBITDA Margin (%) Debt Debt/EBITDA (x) EBITDA/Interest (x) Lines in Service (000) Broadband Accesses (000) Mobile Subscribers (000) IFRS 6/30/12 10,389 3.140 30.2 133 0 448.6 Local GAAP 12/31/11 18,525 5,619 30.3 134 0 224.8 4,148 4,141 1,594 1,550 20,965 20,324 Argentine Risks Constrain Foreign Currency IDR at ‘B’: Telecom Argentina S.A.’s (TEO) ‘B’ foreign currency issuer default rating (IDR) is constrained by Argentina’s country ceiling of ‘B’. In addition to transfer and convertibility (T&C) risks that constrain the foreign currency IDR at ‘B’, additional credit constraints related to the Argentine government include high regulatory risks for fixed-line operators, as well as risks associated with operating in an environment of high inflation. Solid Operations and Market Position Support ‘BB–’ Local Currency IDR: The company’s strong operating performance, solid market position, diversified services portfolio with multiple platforms, and conservative financial profile all support a local currency rating that is two notches higher than TEO’s foreign currency IDR. Diversified Business Mix Lowers Risks: TEO provides both fixed and mobile services in Argentina. The mobile business unit is the main driver of the company’s operating performance, accounting for 70% of revenues and EBITDA during the six months ended June 30, 2012. TEO’s incumbent position in northern Argentina in fixed-line services and mobile services mitigates potential fixed-line traffic loss due to mobile substitution. Fitch Ratings believes fixedmobile convergence can help integrated operators such as TEO improve customer loyalty, reduce operating costs, and avoid cannibalization between business segments. Improved Financial Profile: TEO’s financial profile has improved considerably during the last seven years, driven primarily by better operating results and the use of free cash flow for debt reduction. During 2011, the company’s revenues grew by 26.2% when compared with the previous year, driven by the mobile segment. Fitch expects TEO’s growth to slow as the market matures. The solid operating performance during 2011 has resulted in almost no leverage. What Could Trigger a Rating Action Changes Affecting Financial Structure: The Stable Outlook reflects Fitch’s expectations that TEO will maintain a strong operating performance and a conservative financial profile. Changes in Country Ceiling: TEO’s foreign currency IDR would likely be affected by an upgrade or downgrade in Argentina’s ‘B’ country ceiling. Liquidity and Debt Structure Analysts Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Sergio Rodriguez, CFA +52 81 8399-9100 sergio.rodriguez@fitchratings.com Latin America High Yield November 8, 2012 Liquidity Risk for TEO Is Low: As of Dec. 31, 2011, cash balances totaled approximately ARS2.8 billion, while total debt was ARS134 million. During 2011, free cash flow was ARS1.5 billion. As of June 30, 2012, TEO’s debt continued to have a minimum amount of debt. Change of Accounting Rules: TEO’s audited financials up to fiscal 2011 were in Argentinian GAAP. Since Jan. 1, 2012, the company has adopted IFRS. As a result, Fitch will not show LTM figures for the company during 2012. 221 Corporates Organizational Structure — Telecom Argentina S.A. (ARS Mil., As of Dec. 31, 2011) Telecom Italia Grupo Werthein 32.00% 68.00% Sofora Telecomunicaciones 74.00% Estructura de Capital 51.04% Nortel Inversora Participación Económica 54.74% Telecom Argentina S.A. Amount Outstanding 2011 EBITDA 2011 Total Consolidated Debt 2011 Cash and Marketable Securities TD/EBITDA (x) 99.99% 100.00% 99.99% Micro Sistemas 5,619 140 3,122 0.02 Telecom USA Telecom Personal 67.50% Nucleo (Paraguay) 100.00% Springville TD – Total debt. Source: Fitch and Telecom Argentina financial statements. Latin America High Yield November 8, 2012 222 Corporates Financial Summary Telecom Argentina S.A. (ARS Mil.) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash NIIF 3/31/12 Three Months 2011 LTM 6/30/11 2010 2009 2008 2007 2006 1,648 32.1 5,619 5,619 30.3 0.3 61.9 8.4 0.3 5,093 5,093 30.7 30.7 51.9 10.9 35.9 4,555 4,555 31.0 31.0 49.0 5.5 30.6 3,900 3,900 31.9 31.9 57.0 14.7 29.2 3,330 3,330 31.4 31.4 58.6 14.8 26.7 3,052 3,052 33.6 33.6 52.4 15.5 33.3 2,285 2,285 31.0 31.0 38.1 15.2 11.9 511.3 549.3 183.1 511.3 51.1 200.6 224.8 224.8 127.7 127.7 200.6 35.9 53.0 74.9 74.9 41.4 41.4 53.0 15.3 32.9 47.0 47.0 32.8 32.8 32.9 6.5 24.8 26.7 26.7 4.3 4.3 24.8 2.1 15.3 14.1 14.1 2.1 2.1 15.3 1.1 9.3 8.6 8.6 1.7 1.7 9.3 1.0 5.0 4.7 4.7 1.2 1.2 5.0 0.9 1,926.7 1.5 99.9 2.1 26.9 2.1 16.5 2.0 3.6 2.2 1.8 2.0 1.5 2.2 1.2 2.4 0.0 0.0 (0.5) 8.8 0.2 0.0 0.0 (0.5) 0.0 (0.5) 16.8 0.1 0.1 (0.2) (0.2) 12.9 0.3 0.1 (0.3) (0.3) 19.7 0.3 0.2 0.2 (0.1) 0.2 (0.1) 10.2 0.9 0.6 0.6 0.3 0.6 0.3 9.0 0.7 1.0 1.0 0.7 1.0 0.7 9.7 0.5 1.7 1.8 1.5 1.8 1.5 10.7 0.3 15,815 3,122 24 116 140 140 140 8,875 9,015 14,825 2,818 19 115 134 134 134 7,960 8,094 12,069 1,425 55 134 189 189 189 6,756 6,945 11,964 1,387 42 121 163 163 163 6,363 6,526 10,633 1,289 763 58 821 821 821 5,528 6,349 9,649 1,125 1,355 688 2,043 2,043 2,043 4,101 6,144 9,171 992 1,474 1,724 3,198 3,198 3,198 3,109 6,307 8,720 661 1,395 2,703 4,098 4,098 4,098 2,201 6,299 1,531 (229) 1,302 (845) 457 (6) (156) (3) 292 4,989 (300) 4,689 (2,220) (915) 1,554 (135) 59 (45) 1,433 3,537 596 4,133 (1,954) (364) 1,815 (19) (320) (690) (915) 30 (99) 3,098 562 3,660 (1,803) (1,053) 804 (27) 25 (690) 112 3,476 (188) 3,288 (1,474) (19) 1,795 (17) 260 (1,491) (176) 371 3,364 (230) 3,134 (1,546) (20) 1,568 (112) 341 (1,353) 444 2,947 (294) 2,653 (1,208) (38) 1,407 147 (512) (1,245) (203) 1,916 30 1,946 (825) — 1,121 (41) 62 (1,077) (4) 61 Continued on next page. Source: Telecom Argentina S.A. Latin America High Yield November 8, 2012 223 Corporates Financial Summary Telecom Argentina S.A. (Continued) (ARS Mil.) Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income NIIF 3/30/12 Three Months 2011 LTM 6/2011 2010 2009 2008 2007 2006 5,126 — 1,033 3 698 18,525 26 4,040 25 2,422 16,578 26 3,625 68 2,172 14,679 20 3,201 97 1,821 12,226 15 2,762 146 1,405 10,608 17 2,041 236 961 9,074 23 1,636 355 884 7,372 30 894 482 244 Source: Telecom Argentina S.A. Latin America High Yield November 8, 2012 224 Corporates Transportadora de Gas del Norte S.A. (TGN) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured USD170.45 Notes Senior Unsecured USD56.8 Notes USD250 Mil. Notes USD250 Mil. Notes CCC CCC/ RR4 CCC/ RR4 C/RR5 C/RR5 Local Currency Long-Term IDR CCC National Long-Term Rating USD170.45 Mil. Notes USD56.8Mil. Debt Program USD250 Mil. Notes USD250 Mil. Notes Equity CCC(arg) CCC(arg) CCC(arg) D(arg) D(arg) Level 4 IDR – Issuer default rating. Financial Data Transportadora de Gas del Norte S.A. (ARS Mil.) Total Equity Total Debt Operating Revenue Net Income Net Debt/ EBITDA (x) 6/30/12 1,004 2,142 12/31/11 1,145 1,942 418 (262) 406 (154) 26.0. 16.3. High Leverage: Fitch Ratings anticipates that TGN’s ability to meet interest payments on its restructured debt will be extremely limited due to its weak operating profile. TGN continues to exhibit high leverage as reflected by its pro forma debt-to-EBITDA ratio of 21.4x following the debt restructuring completed in August 2012. New notes for USD201 million were issued as part of the restructuring, and total debt was reduced to USD257 million from USD473.5 million. Weak Operating Profile: The company’s ability to generate cash has been severely affected by a frozen tariff structure since 1999 compounded by inflation, limitation on natural gas exports, and peso depreciation. Operational cash flow is expected to be modestly positive in 2012 as the company will receive approximately USD47 million from the settlement of export related contracts. Invoices will materially decrease in 2013 and 2014 as a result, and operational cash flow is expected to turn negative. Negative cash generation is expected to increase in magnitude in the absence of a tariff increase or any additional source of funds. Uncertain Regulatory Environment: Tariffs have remained frozen since 1999. Although the government ratified a 20% tariff increase in April 2010, the regulatory entity has failed to approve the new tariff scheme. In the event that this tariff increase is retrospectively invoiced by TGN, the monies received would be administered by a special fund and would be used to finance the company’s capital expenditure. A third-party designated by the regulator has been overviewing the company’s operations since 2008. Debt in Default: Approximately USD41.3 million of TGN’s 2012 notes have not been tendered in the company’s exchange offering and remain in default. The amount of defaulted notes increases to USD56.6 million after including penalties and capital interest. The ‘C’ rating on the 2012 notes reflects the expectation of below-average recovery prospects given the default. TGN recently announced its intention to restructure the debt in default. What Could Trigger a Rating Action Implementation of Tariff Increases: A successfully implemented tariff increase, along with a tangible, positive impact on TGN’s operations, could result in a Positive Outlook or rating upgrade. Weaker Financial Performance: A further deterioration in TGN’s operating profile, additional government intervention in the sector or in the company, and/or failure to fulfill its debt obligations could result in a Negative Outlook or rating action. Analyst Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Gabriela Curutchet +54 11 5235-8100 gabriela.curutchet@fitchratings.com Latin America High Yield November 8, 2012 225 Corporates Recovery Analysis Fitch expects a higher recovery value under a liquidation scenario, as opposed to a goingconcern sale for TGN. Fitch’s recovery analysis applies a 50% discount rate to the company’s accounts receivables to reflect the deterioration in the credit quality of some counterparties, particularly natural gas distribution companies. Fitch has also adjusted the discount rate for net PP&E to 20%, as the value of the assets is expected to decrease in the event of liquidation. The recovery analysis assumes a standard 10% administrative claims adjustment and 5% concession to junior claimants. Fitch has included the post-restructuring bonds in this scenario, including the maximum allowed interest capitalization and the bonds that remain in default. TGN’s new notes are better positioned than the notes in default as they have been restructured. The recovery rating for TGN’s new debt instrument reflects Fitch’s expectation that the company’s creditors would have an average recovery consistent with a recovery rating of ‘RR4’. The ‘RR4’ indicates a recovery prospect of 31%–50% of current principal and related interest. It is difficult to anticipate the recovery value for bondholders that did not participate in the debt restructuring but, in the event of liquidation, the company’s assets should have some value. Fitch expects that creditors will have a below-average recovery consistent with an ‘RR5’, which indicates a probability of recovery of 11%–30% of current principal and related interest for the notes that are still in default. Latin America High Yield November 8, 2012 226 Corporates Recovery Analysis Transportadora de Gas del Norte S.A. (TGN) (USD Mil.) IDR: CCC Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value — 0 — 0 — Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total — — — Liquidation Value Cash Accounts Receivable Inventory Net PPE Total Advance Rate (%) 0 50 50 20 161.0 13.0 4.0 438.0 616.0 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Available to Creditors — 6.5 2.0 87.6 96.1 96.10 9.61 86.49 Distribution of Value Secured Priority Senior Secured Secured Lien 0 0 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Restructured Notes Notes in Default Lien 224.7 56.6 Value Recovered — — Recovery (%) 0 0 Recovery Rating — — Notching — — Rating — — 86.5 — 86.5 4.3 82.2 Value Recovered 86.5 — Recovery (%) 38 0 Concession Allocation (%) 100 0 Recovery Rating RR4 RR5 Notching 0 –2 Rating CCC C Source: Transportadora de Gas del Norte S.A. (TGN). Latin America High Yield November 8, 2012 227 Corporates Organizational Structure — Transportadora de Gas del Norte S.A. Tecpint 27.24% CGC TGEA 27.34% RPM 20.60% 18.29% Blue Ridge Gasinvest 56.35% Total 23.53% 6.63% Free Float 20.00% Others 0.12% Transportadora Gas del Norte S.A. 1H12 EBITDA: ARS24 Million 1H12 Debt: ARS2,142 Million TD/EBITDA (x): 43 TD –Total debt. Source: TGN’s quarterly results and Fitch’s estimates. Latin America High Yield November 8, 2012 228 Corporates Debt and Covenant Synopsis Transportador de Gas del Norte S.A. (TGN) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration PIK Interest Rate Intercompany Loans Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Transportadora Gas del Norte S.A. (TGN) N.A. Sept. 14, 2006 Dec. 31, 2012 (Defaulted on January 2009) Senior Unsecured Notes N.A. N.A. Change-of-control clause at 101% of principal. The issuer and its affiliates cannot sell assets unless: 1) at least 75% is paid in cash, 2) the issuer remains in compliance with the terms and conditions of the notes, and 3) net proceeds are used to repurchase outstanding notes. Neither the issuer nor its affiliates are allowed to incur additional debt except permitted debt. Permitted debt includes debt used to refinance existing or permitted indebtedness, subject to standard limitations. TGN is allowed to incur or maintain up to USD15 million of additional indebtedness, and up to USD35 million of additional subordinated debt. Should the issuer or its affiliates incur additional indebtedness, TGN is required to maintain consolidated debt to EBITDA (as defined in the indenture) equal to or below 3.5x. Subject to certain conditions, TGN or its subsidiaries may incur in liens on assets, trade receivables, or future flows when: 1) the lien is permitted by the concession agreement and 2) if the guaranteed debt is subordinated and the notes are also secured by such lien. The issuer and its affiliates are prohibited from paying dividends, technical assistance services above USD1 million in the event of default, and payments on subordinated indebtedness. The issuer and its affiliates are allowed to make restricted payments if 1) no event of default occurs or is continuing or 2) there is sufficient liquidity (as defined in the indenture) to make such payment. Cross default when an uncured event of default occurs for debt of more than USD15 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency or bankruptcy. Intercompany loans are subordinated. The issuer may purchase Series A notes at par. After the full amortization of Series A, the issuer may purchase Series B notes at 101% in 2010, 105.5% in 2011, and at par in 2012. Transactions between the issuer and affiliates should follow good business practices. Restrictions on merger or consolidation of issuer and subsidiaries. Exceptions require that: 1) bondholders have the opportunity to oppose such transactions; 2) the surviving entity will be the issuer or another corporation existing under the laws of Argentina; 3) the surviving entity assumes the existing debt; 4) no event of default occurs or is continuing; 5) the company’s pro forma net worth is similar or higher than an existing one prior to such transaction; and 6) the resulting consolidated debt-to-EBITDA ratio is equal or below to the one prior to such transaction. The note will be redeemed on a pro rata basis if the issuer or affiliates sell assets. Mandatory Redemption N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 229 Corporates Debt and Covenant Synopsis Transportador de Gas del Norte S.A. (TGN) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration PIK Interest Rate Intercompany Loans Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Mandatory Redemption Limitation on Capital Expenditures Transportadora Gas Del Norte S.A. (TGN) N.A. July 12, 2012 Seven Years Senior Unsecured USD170.45 Mil. Step-Up Notes N.A. N.A. Change-of-control clause at 101% of principal. The issuer and its affiliates cannot sell assets unless: 1) at least 75% is paid in cash, 2) the issuer remains in compliance with the terms and conditions of the notes, and 3) net proceeds are used to repurchase outstanding notes. Neither the issuer nor its affiliates are allowed to incur additional debt except permitted debt. Permitted debt includes: 1) debt used to refinance existing or permitted indebtedness, subject to standard limitations, 2) up to USD15 million of additional indebtedness, provided such funds are used for purposes related to the operations of the company, 3) other indebtedness, if proceeds are applied solely to fund permitted capital expenditures, provided that TGN maintains a leverage ratio of 3.0x after giving effect to such transaction. Subject to certain conditions, TGN or its subsidiaries may incur liens on assets of up to USD10 million, and on receivables up to USD30 million. The issuer and its affiliates are prohibited from paying dividends. Restrictions also apply for technical assistance services so long as TGN capitalizes interest under the notes and until all capitalized amounts have been paid. The issuer and its affiliates are allowed to make restricted payments if 1) no event of default occurs or is continuing and 2) there is sufficient liquidity — as defined in the indenture — to make such payment. Cross default when an uncured event of default occurs for debt of more than USD 15 million. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency, bankruptcy, or in the event the license is revoked or suspended for at least 120 days. The new step-up notes will carry a coupon rate that steps up over the course of the notes of 3.5% for years one and two, 7% for years three and four, and 9% for years five through seven. The interest payment can be picked during the first three years, and there is a minimum cash interest payment of 3.5% in year four, with the option for TGN to capitalize the remainder. Intercompany loans are permitted and are subordinated to the notes. The issuer may purchase the notes, in whole or in part, at 100% of the principal plus accrued unpaid interest. Transactions between issuer and affiliates should follow good business practices. Restrictions on the merger or consolidation of issuer and subsidiaries. Exceptions require that: 1) bondholders have the opportunity to oppose to such transaction; 2) the surviving entity will be the issuer or another corporation existing under the laws of Argentina; 3) the surviving entity assumes the existing debt; 4) no event of default occurs or is continuing; 5) the company’s pro forma net worth is similar or higher than an existing one prior to such transaction; and 6) the resulting consolidated leverage is equal to or below the one prior to such transaction. The notes will be redeemed should there be any incremental cash, distributable cash, and creditor cash surplus available, as defined in the terms and conditions of the notes. The prepayment will be initially applied to any accrued capitalized interest payment and then to principal. The notes will also be redeemed with proceeds from asset sales and expropriations of assets with a market value in excess of USD5 million, and with proceeds from an equity issuance. TGN can invest in permitted capital expenditures provided that immediately afterwards, no event of default has occurred or is continuing. Permitted capital expenditures include the maintenance of capex for up to USD20 million per fiscal year, capex related to unscheduled emergency repair, and the maintenance of government-mandated capex. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 230 Corporates Debt and Covenant Synopsis Transportador de Gas del Norte S.A. (TGN) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Limitation on Secured Debt Restricted Payments Other Cross Default Acceleration PIK Interest Rate Intercompany Loans Restriction on Purchase of Notes Transactions with Affiliates Limits on Consolidations or Mergers Mandatory Redemption Limitation on Capital Expenditures Transportadora Gas Del Norte S.A. (TGN) N.A. July 12, 2012 The claim protection notes will be automatically cancelled on the first anniversary of the debt restructuring settlement, without any payment from TGN, provided that no event of default has occurred. Should they not be extinguished at that time, the claim protection notes will mature seven years from the final settlement date. Senior Unsecured USD56.8 Million Claim Protection Notes N.A. N.A. Change of control clause at 101% of principal, if a triggering event has occurred. A triggering event is defined as the declaration or automatic acceleration of the step- up notes. The issuer and its affiliates cannot sell assets unless: 1) at least 75% is paid in cash, 2) the issuer remains in compliance with the terms and conditions of the notes, and 3) net proceeds are used to repurchase outstanding notes, including the claim protection notes if a triggering event has occurred (as defined in the indenture). Neither the issuer nor its affiliates are allowed to incur additional debt except permitted debt. Permitted debt includes: 1) debt used to refinance existing or permitted indebtedness, subject to standard limitations; 2) up to USD15 million of additional indebtedness, provided such funds are used for purposes related to the operations of the company; and 3) other indebtedness, if proceeds are applied solely to fund permitted capital expenditures, provided that TGN maintains a leverage ratio of 3.0x after giving effect to such transaction. Subject to certain conditions, TGN or its subsidiaries may incur liens on assets up to USD10 million and on receivables, up to USD30 million. The issuer and its affiliates are prohibited from paying dividends and other restricted payments. Cross default when an uncured event of default occurs for debt of more than USD15 million. Also, if after the occurrence of a triggering event (as defined in the indenture) TGN fails to pay interest on the new step-un notes during 15 business days. If any event of default occurs and is continuing, the trustee or the holders of at least 25% of the outstanding notes may declare the notes to be due and payable. Notes become automatically due and payable upon certain events of insolvency, bankruptcy, or in the event the license is revoked or suspended for at least 120 days. N.A. Intercompany loans are permitted and are subordinated to the notes. The issuer may purchase the notes, in whole or in part, at 100% of the principal. Transactions between the issuer and affiliates should follow good business practices. Restrictions on the merger or consolidation of the issuer and subsidiaries. Exceptions require that: 1) bondholders have the opportunity to oppose such a transaction; 2) the surviving entity will be the issuer or another corporation existing under the laws of Argentina; 3) the surviving entity assumes the existing debt; 4) no event of default occurs or is continuing; 5) the company’s pro forma net worth is similar to or higher than the existing one prior to such transaction; and 6) the resulting consolidated leverage is equal to or below the one prior to such transaction. If a triggering event has occurred and there is any incremental cash, distributable cash, or creditor cash surplus available, the notes will be redeemed on a pro rata basis with the new step up notes. TGN can invest in permitted capital expenditures provided that, immediately after, no event of default has occurred or is continuing. Permitted capital expenditures include the maintenance of capex for up to USD 20 million per fiscal year, capex related to unscheduled emergency repair, and the maintenance of government-mandated capex. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 231 Corporates Financial Summary Transportador de Gas del Norte S.A. (TGN) Period-End Exchange Rate (ARS/USD) Period Average Exchange Rate (ARS/USD) (ARS Mil., Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.3011 4.3053 4.1295 3.9787 3.9134 3.799 3.7279 3.4538 3.1631 LTM 6/30/12 2011 2010 2009 2008 11,475 11.8 21.0 88.2 (22.9) 18,347 18.6 15.8 41.0 (12.6) 48,429 38.3 16.4 37.4 5.7 71,076 49.9 16.8 34.4 (4.0) 89,953 56.4 13.5 28.3 (2.7) 3.4 0.3 0.0 3.4 0.3 0.6 6.9 2.7 0.4 0.0 2.7 0.2 0.5 3.7 3.5 1.4 0.1 3.5 0.2 0.5 3.4 4.1 2.4 0.2 4.1 0.2 0.4 3.3 4.4 3.8 0.2 4.4 0.2 0.3 4.1 3.1 41.3 26.0 10.0 — 1.0 3.8 24.6 16.3 10.1 — 1.0 3.3 8.5 6.0 8.9 — 1.0 3.2 5.3 4.2 8.0 — 1.0 3.3 3.9 3.4 6.7 — 1.0 765,608 175,143 473,531 — 473,531 — 473,531 — 473,531 222,127 695,658 779,888 152,657 451,149 — 451,149 — 451,149 — 451,149 266,106 717,255 800,842 123,270 411,438 — 411,438 — 411,438 — 411,438 326,676 738,114 757,594 80,098 378,867 — 378,867 — 378,867 — 378,867 322,896 701,763 764,159 44,583 351,197 — 351,197 — 351,197 — 351,197 370,093 721,290 108,275 (7,895) 100,380 0 (14,615) 0 85,766 0 (66,953) 0 0 (196) 18,617 74,676 (19,460) 55,215 0 (14,808) 0 40,407 0 (58,310) 0 0 0 (17,903) 88,180 (20,859) 67,321 0 (19,942) 0 47,379 0 (44,823) 0 0 (60) 2,497 90,719 (20,851) 69,868 0 (20,863) 0 49,005 0 (3,078) 0 0 (8,698) 37,229 82,045 (22,460) 59,585 0 (14,400) 0 45,185 0 0 (17,261) 0 159 28,083 97,189 — (19,999) 45,133 0 (60,805) 98,541 (22.1) (13,886) 43,440 0 (37,312) 126,550 (11.1) 14,836 35,058 0 18,670 142,430 (10.7) 37,257 29,237 0 (13,827) 159,491 (4.1) 50,843 23,916 0 (10,602) Source: Fitch. Latin America High Yield November 8, 2012 232 Corporates Transportadora de Gas del Sur S.A. (TGS) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured notes due 2017 Local Currency Long-Term IDR B B/RR4 B+ IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR RWN Stable RWN – Rating Watch Negative. Financial Data Transportadora de Gas del Sur S.A. LTM (USD Mil.) 6/30/12 12/31/11 Revenue 497 449 EBITDA 182 187 CFFO 123 107 Cash and Marketable Securities 150 107 Total Debt 378 378 Total Debt/ EBITDA (x) 2.1 2.0 Net Debt/ EBITDA (x) 1.2 1.4 Foreign Currency IDR Constrained: TGS’ foreign currency issuer default rating (IDR) is constrained by Argentina’s country ceiling of ‘B’ and its recovery rating of ‘RR4’ is constrained by the soft cap of ‘RR4’ for bonds issued by Argentine corporates. Country ceilings capture the risk of exchange controls being imposed that would prevent or materially impede the private sector’s ability to convert local currency and transfer the proceeds to nonresident creditors transfer and convertibility risk (T&C) risk. High Regulatory Risk: The weak regulatory framework has affected TGS’ original business model. The company’s core business, its natural gas transportation unit, has been operating with frozen tariffs since 1999, reducing its share of EBITDA to approximately 35%. Its liquefied natural gas (LNG) processing unit represents the remaining 65%. The company’s credit quality would come under additional pressure, should unfavorable regulatory and operating events affect TGS’ LNG business unit. Recently, a court suspended the application of an increase in a tariff charge to be paid by natural gas processors. Conservative Leverage Is a Key Credit Consideration: TGS’ conservative capital structure mitigates some existing operational and regulatory risks. As of June 2012, debt was USD378 million, with a debt to EBITDA of 2.1x, which is low for the credit category. Debt is concentrated in the long term with no debt maturities until May 2014. Until then, the company’s annual debt service consists of approximately USD30 million in interest payments. Satisfactory Operating Performance: Despite frozen tariffs for its pipeline business and rising inflation, TGS has maintained good cash generation levels, which mostly reflect high international prices for LNG. To a lesser extent an increase in 2011 of its pipeline utilization factor increased to 81% also helped cash flow. For the LTM ended June 30, 2012 TGS’ EBITDA was 182 million, similar to 2011. Near-term capital expenditures are expected to remain at approximately USD40 million, which should allow the company to generate USD40 million to USD55 million of free cash flow and maintain considerable financial flexibility for the rating category. What Could Trigger a Rating Action Analysts Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Gabriela Curutchet +54 11 5235-8100 gabriela.curutchet@fitchratings.com Latin America High Yield November 8, 2012 Natural Gas Unavailability: A prolonged unavailability of natural gas for TGS’ LNG business could result in a negative rating action. Gas shortages are the result of the redirection of natural gas for residential consumption. Gas shortages are somewhat mitigated through the company’s strategy to pursue gas contracts with producers. The maintenance of frozen tariffs also constitutes one of TGS’ main risks. Sharp and Sustained Decrease in LNG Prices: A sharp and sustained decrease in LNG prices could be a catalyst for a negative rating action. Change in Sovereign Credit Quality: TGS’ ratings would be affected by an upgrade or downgrade of Argentina’s country ceiling. 233 Corporates Recovery Rating In deriving a distressed enterprise valuation to determine the recovery under this scenario, Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Although the EBITDA is vulnerable to unfavorable regulatory and operating events, it should be noted that TGS has financial flexibility as interests and minimum capital expenditures are marginal compared to its distressed cash flow generation. Fitch has applied a 5.0x distressed EBITDA multiple, which reflects adequate cash generation in an event of distress when compared to interest payments and capital expenditures. The bespoke recovery analysis indicates extremely high recovery prospects. Despite this analysis, the ratings have been constrained by the soft cap of ‘RR4’ for bonds issued by corporates domiciled in Argentina. This recovery rating is consistent with an expectation that the company’s creditors would have an average recovery in the event of a default. Recovery Analysis Transportadora de Gas del Sur S.A. (TGS) (USD Mil., As of June 30, 2012) IDR: B Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 182.0 35 118.3 5.0 591.5 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 30.0 — 40.0 70.0 Liquidation Value Cash Accounts Receivable Inventory Net PPE Total 150.0 57.0 — 881.0 1,088.0 Advance Rate (%) 0 65 55 40 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims Available to Creditors — 37.1 — 352.4 389.5 591.5 59.2 532.4 Distribution of Value Secured Priority Senior Secured Secured Lien 0.0 0.0 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecureda Unsecured Lien 375.0 — Value Recovered — — Recovery (%) 0 0 Recovery Rating — — Notching — — Rating — — 532.4 — 532.4 26.6 505.7 Value Recovered 375.0 — Recovery (%) 100 — Concession Allocation (%) 100 — Recovery Rating RR4 — Notching 0 — Rating B — Note: Numbers may not add due to rounding. Source: Transportadora de Gas del Sur S.A. (TGS). Latin America High Yield November 8, 2012 234 Corporates Organizational Structure — Transportadora de Gas del Sur (TGS) (As of LTM June 30, 2012) Petrobras Group 50% CIESA Trust Pampa Energia 10% 40% CIESA Public Float 51% 49% Transportadora de Gas del Sur S.A. EBITDA: USD182 Million Consolidated Total Debt: USD378 Million TD/EBITDA: 2.1x ND/EBITD: 1.2x 100% Telcosur S.A. TD – Total debt. ND – Net debt. Source: Transener and subsidiaries’ financial statements, Fitch. Latin America High Yield November 8, 2012 235 Corporates Debt and Covenant Synopsis Transportadora de Gas del Sur S.A. (TGS) (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Sale of Assets Restriction Debt Restriction Additional Debt Restriction Restricted Payments Other Transactions with Affiliates Limits on Consolidations or Mergers Transportadora de Gas del Sur S.A. N.A. (Debt is senior unsecured) Jan. 18, 2007 May 14, 2017 Senior Unsecured Notes N.A N.A. N.A. N.A. The issuer can incur in new debt only if (1) consolidated leverage coverage ratio known as debt/EBITDA is less or equal than 2,0x; (2) EBITDA/interest expense is at a minimum of 3.75x after additional debt is assumed; and (3) for refinancing reasons. Dividends may be only distributed if the issuer is not in breach of its financial commitments with its debt holders. Additionally, for the issuer to be able to issue dividends, immediately after such payment, the issuer should be able to assume more debt without surpassing 2.0x debt/EBITDA and maintain a minimum interest coverage ratio of 3.75x. Transactions between issuer and affiliates are only permitted if they reflect market conditions or if they are not unfavorable to the issuer. Restrictions on the merger of issuer and subsidiaries. Exceptions include that the surviving entity will be a corporation existing under the laws of Argentina or the U.S., no event of default occurs or is continuing, the company’s pro forma debt levels, allowing it to incur additional indebtedness. Any surviving entity would assume all obligations of issuers under the indenture. N.A. Not applicable. Disclaimers: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 236 Corporates Financial Summary Transportadora de Gas del Sur S.A. (TGS) Period-End Exchange Rate Average Exchange Rate (ARS 000, Fiscal Years Ended Dec. 31) Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDA/ Debt-Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.3012 4.3053 4.1295 3.9787 3.9134 3.7990 3.7279 3.4700 3.1800 6/30/12a 2011 2010 2009 2008 784,354 36.7 16.6 16.7 9.5 773,923 41.7 17.9 (38.0) 8.8 578,689 35.0 7.4 8.9 3.1 770,961 48.2 17.0 20.8 5.7 636,200 44.8 16.0 23.2 5.8 4.1 5.2 4.7 4.1 3.0 7.1 3.1 4.4 5.4 4.8 4.4 (3.5) (0.6) 2.6 2.8 4.5 4.0 2.8 1.9 9.5 2.2 5.3 5.1 4.6 5.3 2.9 9.1 3.4 5.1 4.5 4.1 5.1 3.0 6.9 2.6 2.7 2.2 1.3 9.2 — 0.0 2.5 2.1 1.5 9.2 — 0.0 4.2 2.6 0.7 8.5 — 0.0 1.9 2.0 0.6 10.3 — 0.0 2.0 2.2 1.3 9.4 — 0.0 5,155,273 680,646 16,668 1,693,207 1,709,875 — 1,709,875 — 1,709,875 2,054,064 3,763,939 5,024,166 459,292 15,846 1,609,799 1,625,645 — 1,625,645 — 1,625,645 1,953,492 3,579,137 5,611,345 1,089,480 14,661 1,487,119 1,501,780 — 1,501,780 — 1,501,780 3,293,020 4,794,800 5,619,190 1,025,142 14,983 1,502,330 1,517,313 — 1,517,313 — 1,517,313 3,221,109 4,738,422 5,033,324 604,690 13,932 1,398,465 1,412,397 — 1,412,397 — 1,412,397 3,072,729 4,485,126 474,214 54,984 529,198 — (172,260) — 356,938 — (109,382) — — 70,108 317,664 497,906 (57,470) 440,436 — (168,299) (976,000) (703,863) — (109,073) — — 70,108 (742,828) 227,511 92,999 320,510 — (143,770) (30,325) 146,415 926 — (83,003) — — 64,338 654,353 (142,716) 511,637 — (149,147) (30,000) 332,490 — — (25,497) — 113,459 420,452 577,127 4,954 582,081 — (220,792) (32,000) 329,289 — 28,386 (191,486) — 47,183 213,372 2,138,724 27 557,155 150,769 — 212,514 1,853,875 13 552,493 144,517 — 230,679 1,653,001 12 363,393 128,806 — 102,236 1,600,648 13 561,517 151,416 — 178,380 1,419,202 13 431,432 140,944 — 175,091 a June 30, 2012 six-month figures. Note: Numbers may not add due to rounding. Source: Fitch. Latin America High Yield November 8, 2012 237 Corporates Urbi Desarrollos Urbanos, S.A. B. de C.V. Full Rating Report Ratings Key Rating Drivers Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B High Rate of Cash Burn: Urbi Desarrollos Urbanos, S.A.B. de C.V. (Urbi) exhibited a negative FCF of MXN5.8 billion during the LTM ended June 30, 2012, mainly due to a MXN7 billion working capital outflow during the period. This level of negative FCF represents 35% and 98% of the company’s LTM revenue and cash position, respectively. National BBB(mex) F3(mex) BBB(mex) Long-Term Rating Short-Term Rating Senior Unsecured Rating Outlooks Long-Term Foreign Currency IDR Negative Long-Term Local Currency IDR Negative National Long-Term Rating Negative Financial Data Urbi Desarrollos Urbanos, S.A. B. de C.V. (MXN Mil.) Revenue EBITDA EBITDAR Margin (%) FCF FCF Margin (%) Cash Short-Term Debt Total Debt Total Debt/ EBITDA (x) 6/30/12 16,592 4,475 12/31/11 16,328 4,360 27.0 (5,792) (34.9) 5,902 3,543 19,482 26.7 (4,070) (24.9) 5,529 6,445 14,921 4.4 3.4 Tightening Liquidity: The continued decline in Urbi’s cash on balance sheet will result in a higher short-term debt position for the company. Liquidity could significantly deteriorate during the next few quarters should the current trend continue. As of June 30, 2012, Urbi maintained an adequate cash position of MXN5.5 billion, while its short-term debt was MXN3.5 billion, comprised mostly of bank loans. Higher Leverage: Urbi funded its cash flow shortfall with additional debt. The company had MXN19.4 billion of debt at June 30, 2012, an increase from MXN10.9 billion at the end of 2010. This resulted in an increase in the company’s total debt/EBITDA ratio to 4.4x as of June 30, 2012 from 2.7x as of Dec. 31, 2010, and an increase in its net debt/EBITDA ratio to 3.0x from 1.2x during this time period. 2012 Growth Expectations Adjusted Down: Fitch Ratings expects Urbi’s 2012 revenues to decline between 10% and 15% from 2011 levels. After poor FCF generation in second-quarter 2012, the company has announced its intention to reduce growth and improve FCF generation. Large Player in Fragmented Industry: The ratings reflect Urbi’s business position as one of the three largest players in the Mexican homebuilding industry, with important participation in government-related mortgage funding programs. Business Strategy Incorporated: The ratings are constrained by Urbi’s high working capital requirements that reflect its business strategy of covering the affiliated and non-affiliated segments, as well as increasing exposure with corporate clients that require collection periods of between nine and 36 months. They also reflect the company’s track record of growing inorganically through opportunistic acquisitions of housing projects in progress (HPPs). Negative Outlook due to Liquidity Concerns: Urbi’s Negative Rating Outlook reflects the potential deterioration in its liquidity position should the current cash flow trends continue. The company’s cash-to- short-term debt ratio is sufficient at 1.7x, but its CFFO plus cash-to-shortterm debt coverage is just 0.1x due to negative CFFO of MXN5.7 billion for the LTM to June 30, 2012. Analysts José Vértiz +1 212 908-0641 jose.vertiz@fitchratings.com Indalecio Riojas +52 81 8399-9108 indalecio.riojas@fitchratings.com Latin America High Yield November 8, 2012 What Could Trigger a Rating Action FCF Generation Is the Main Rating Driver: The ratings are expected to be driven by the company’s ability to generate FCF and trends in its liquidity. A negative rating action could be triggered by a deterioration of the company’s credit ratios due to continued sizeable negative FCF. A continued negative FCF margin during the next few quarters similar to the levels observed during LTM to June 30, 2012 will likely result in a downgrade. An upgrade is not likely until the company reverses its current cash flow trends and lowers its leverage. 238 Corporates Recovery Rating Fitch’s follows a liquidation scenario rather than a restructuring scenario (as a going concern) under its recovery analysis for Urbi with the assumption that it provides a higher recovery value to creditors. Under this scenario, Fitch applies the industry’s standard discount rates to the company’s cash, accounts receivable, inventories, and net PP&E of 0%, 80%, 55%, and 20%, respectively. The ‘B/RR4’ ratings of the company’s unsecured public debt reflect average recovery prospects in the event of default. The recovery ratings are capped at RR4 due to the ‘soft cap’ applied to the Mexican corporates under Fitch’s criteria, and reflect the subordination of the public unsecured debt held at the holding company with respect to secured debt being held at the operating companies. Recovery Analysis Urbi Desarrollos Urbanos, S.A.B. de C.V.’s (Urbi) (MXN Mil., As of June 30, 2012) Enterprise Value (As of June 30, 2012) EBITDA EBITDA Discount (%) Distressed EBITDA Market Multiple Enterprise Value Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total Distribution of Value by Priority Greater of Enterprise or Liquidation Value Less Administrative Claims Less Concession Payments Adjusted Value Issuer Default Rating Senior Unsecured Amount Outstanding and Available R/C 15,940 4,474 40 2,684 3.5 9,395 21.6 — 15 36.6 Cash Accounts Receivable Inventory PP&E, Net Total Balance Recovery Rates (%) 5,902 0 9,768 80 29,460 55 526 20 45,656 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Available to Creditor 7,814 16,203 105 24,123 352.1 117.4 234.7 11.7 222.9 24,123 2,412 0.0 21,710 Value Recovered 15,940 Recovery Rate (%) 100 ‘RR’ Rating Capped/RR4 Notching 0 Credit Ratings B B Source: Urbi’s financial statements and Fitch Ratings. Latin America High Yield November 8, 2012 239 Corporates Urbi’s Organizational Structure (MXN Mil., As of June 30, 2012) Urbi IDR: B/Outlook Negative (Figures for the first six months of 2012) Consolidated Cash Stand-Alone Cash Consolidated Debt Stand-Alone Debt Consolidated EBITDA Stand-Alone EBITDA Consolidated Debt/EBITDA Consolidated Sales Consolidated Account Receivables (AR) Stand-Alone AR 5,902 168 18,249 15,702 1,916 88 4.35 6,966 10,184 212 6M12 Total Consolidated Units Sold 15,076 URBI’s Main Operating Companies 99.99% CYD/IOSA/PROMURBI (Combined) Cash % Total Cash Total Debt % Total Debt EBITDA % Total EBITDA ST Debt Sales % Total Sales AR %Total AR 6M 2012 Units Sales URBI: 99.99% 99.99% 3,796 64 2,547 14 1,624 85 1,853 6,063 87 9,220 91 11,945 CYD Cash % Total Cash Total Debt % Total Debt EBITDA % Total EBITDA ST Debt Sales % Total Sales AR %Total AR 6M 2012 Units Sales 99.99% IOSA 1,627 28 1,321 7 564 29 1,063 2,532 36 3,362 33 4,291 Cash % Total Cash Total Debt % Total Debt EBITDA % Total EBITDA ST Debt Sales % Total Sales AR %Total AR 6M 2012 Units Sales 99.99% PROMURBI 1,177 20% 1,043 6% 683 36% 647 2,055 30% 4,432 44% 3,911 Cash % Total Cash Total Debt % Total Debt EBITDA % Total EBITDA ST Debt Sales % Total Sales AR %Total AR 6M 2012 Units Sales Other Subs 992 17% 183 1% 377 20% 143 1,476 21% 1,426 14% 3,743 Cash % Total Cash Total Debt % Total Debt EBITDA % Total EBITDA ST Debt Sales % Total Sales AR %Total AR 6M 2012 Units Sales 1,938 33% — 0% 204.5 11% — 903 13% 752 7% 3,131 Urbi Desarrollos Urbanos, S.A.B. de C.V. (parent company) Main Subsidiaries: CYD: Cyd Desarrollos Urbanos, S.A. de C.V. IOSA: Ingenieria y Obras, S.A. de C.V. PROMURBI: Promocion y Desarrollos Urbi, S.A. de C.V. ORDURBI: Obras y Desarrollos Urbi, S.A. de C.V. TEC: Tec Diseño e Ingenieria, S.A. de C.V. PROMSA: Propulsora Mexicana de Parques Industriales, S.A. de C.V. METRO: Constructora Metropolitana Urbi, S.A. de C.V. PACIFICO: Urbi Construcciones del Pacifico S.A. de C.V. FINURBI: Financiera Urbi, S.A. de C.V., Sofom, ENR ARMMED: Desarrolladora Armmed Norte, S.A. de C.V. CODEO: Constructora y Desarrolladora del Occidente, S.A. de C.V. HEROF: Herof Desarrolladora del Sur, S.A. de C.V. DEMEX: Desarrolladora Mex-Centro, S.A. de C.V. LUFRO: Lufro Desarrolladora del Bajio, S.A. de C.V. PACMEX: Inmobiliaria y Constructora Pac-Mex, S.A. de C.V. Source: Urbi. Latin America High Yield November 8, 2012 240 Corporates Debt and Covenant Synopsis — Urbi Desarrollos Urbanos, S.A. B. de C.V. Overview Issuer Subsidiary Guarantors URBI, Desarrollos Urbanos, S.A.B. de C.V. The payment of principal, interest and premium on the notes will be fully and unconditionally guaranteed on a senior unsecured basis by Ingeniería y Obras, S.A. de C.V., Obras y Desarrollos Urbi, S.A. de C.V., Cyd Desarrollos Urbanos, S.A. de C.V., Tec Diseño e Ingeniería S.A. de C.V., Promoción y Desarrollos Urbi, S.A. de C.V., Propulsora Mexicana de Parques Industriales, S.A. de C.V., Urbi Construcciones del Pacífico, S.A. de C.V., Constructora Metropolitana Urbi, S.A. de C.V. and Financiera Urbi, S.A. de C.V., Sofom E.N.R., which collectively held approximately 99% of the company’s total assets and accounted for approximately 99% of the company’s EBITDA as of June 30, 2012. Issuances Document Date April 19, 2006 Jan. 19, 2010 Jan. 27, 2012 Dec. 9, 2011 Maturity Date April 19, 2016 Jan. 19, 2020 Feb. 3, 2022 Dec. 9, 2014 Description of Debt International — Senior Unsecured Guaranteed Notes International — Senior Unsecured Guaranteed Notes International — Senior Unsecured Guaranteed Notes Amount USD150 Mil. USD300 Mil. USD500 Mil. Local — Certificados Bursatiles (CBs) — Senior Unsecured Guaranteed Notes MXN 600 Mil. Main Characteristics The following is a summary of the main characteristics included in the indentures governing the above-indicated international and local issuances. The international and local unsecured guaranteed notes will rank equally with the company’s existing and future senior unsecured indebtedness. Certain of the company’s subsidiaries will fully and unconditionally guarantee the notes on a senior basis. Each guarantee will be unsecured and rank equally with all existing and future senior unsecured indebtedness of the subsidiary guarantors. The notes will also be effectively subordinated to the company’s and the subsidiary guarantors’ secured indebtedness to the extent of the value of the assets securing such indebtedness. The notes and guarantees will be structurally subordinated to the indebtedness (including trade payables) of existing and future nonguarantor subsidiaries. Ranking Financial Covenants Limitation on Incurrence of Additional Indebtedness The company will not, and will not cause or permit any of its restricted subsidiaries to, directly or indirectly, incur any indebtedness, including acquired Indebtedness, except that the company and any subsidiary guarantor may incur indebtedness, including acquired indebtedness, if, at the time of and immediately after giving pro forma effect to the Incurrence thereof and the application of the proceeds therefrom, the consolidated fixed charge coverage ratio of the company is greater than 2.0 to 1.0. Notwithstanding clause above, the company and its restricted subsidiaries, as applicable, may incur in additional Indebtedness under certain circumstances. Acquisitions/Divestitures Change of Control Provision Limitations on Guarantees Upon the occurrence of a change of control, each holder will have the right to require that the company purchase all or a portion (in minimum principal amounts of USD200,000 and integral multiples of USD1,000 in excess thereof) of the holder’s notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon through the date of purchase. The company will not permit any restricted subsidiary of the company that is not a subsidiary guarantor to guarantee any indebtedness of the company or a subsidiary guarantor or to secure any Indebtedness of the company or a subsidiary guarantor with a lien (other than permitted liens) on the assets of such restricted subsidiary, unless contemporaneously therewith (or prior thereto) effective provision is made to guarantee or secure the notes on an equal and ratable basis with such guarantee or lien for so long as such guarantee or lien remains effective, and in an amount equal to the amount of indebtedness so guaranteed or secured. Any guarantee by any such restricted subsidiary of subordinated indebtedness of the company or a subsidiary guarantor will be subordinated and junior in right of payment to the contemporaneous guarantee of the notes by such restricted subsidiary. Others Limitation on Asset Sales and Sales of Subsidiary Stock The company will not, and will not permit any of its restricted subsidiaries to, consummate an asset sale unless: (a) the company or the applicable restricted subsidiary, as the case may be, receives consideration at the time of such asset sale at least equal to the fair market value of the assets or capital stock sold or otherwise disposed of, and (b) at least 75% of the consideration received for the assets or capital stock sold by the company or the restricted subsidiary, as the case may be, in such asset sale shall be in the form of cash or cash equivalents received at the time of such asset sale. Limitation on Dividend and Other The company will not, and will not cause or permit any of its restricted subsidiaries to, directly or indirectly, create or otherwise cause Payment Restrictions Affecting or permit to exist or become effective any encumbrance or restriction on the ability of any restricted subsidiary to: (1) pay dividends or Restricted Subsidiaries make any other distributions on or in respect of its capital stock to the company or any other restricted subsidiary or pay any Indebtedness owed to the Company or any other restricted subsidiary; (2) make loans or advances to, or guarantee any Indebtedness or other obligations of, or make any Investment in, the company or any other restricted subsidiary; or (3) transfer any of its property or assets to the company or any other restricted subsidiary. The paragraph above will not apply to encumbrances or restrictions existing under certain circumstances. Limitation on Merger, The company will not, in a single transaction or series of related transactions, consolidate or merge with or into any person (whether Consolidation and Sale of Assets or not the company is the surviving or continuing person), or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any restricted subsidiary to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the company’s properties and assets (determined on a consolidated basis for the company and its restricted subsidiaries), to any person unless the company shall be the surviving or continuing person, or under other specific circumstances. Source: Urbi Desarrollos Urbanos, S.A.B. de C.V. and Fitch Ratings. Latin America High Yield November 8, 2012 241 Corporates Financial Summary — Urbi Desarrollos Urbanos, S.A.B. de C.V. (MXN 000) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin Operating EBITDAR Margin FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Operating Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other Financing, Net Total Change in Cash Income Statement Net Revenues Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 2008 2009 2010 2011 LTM 6/30/12 4,149,619 4,149,619 27.66 27.66 16.16 (18.00) 15.45 4,132,061 4,132,061 30.16 30.16 15.32 10.98 10.54 4,066,580 4,066,580 27.15 27.15 13.37 (3.00) 11.33 4,360,899 4,360,899 26.71 26.71 8.48 (25.00) 14.22 4,474,439 4,474,439 26.97 26.97 6.71 (35.00) 11.38 3.10 3.53 3.53 1.05 1.05 3.10 — 0.13 (24.00) 3.04 3.80 3.80 0.84 0.84 3.04 0.52 1.41 20.76 2.72 3.09 3.09 0.89 0.89 2.72 0.18 1.50 (2.00) 2.34 3.63 3.63 0.57 0.57 2.34 — 0.35 (24.00) 2.15 3.78 3.78 0.95 0.95 2.15 (1.00) 0.27 (51.00) 1.96 1.72 1.24 1.72 1.24 18.50 — 0.39 2.38 1.91 0.84 1.91 0.84 14.50 — 0.49 3.07 2.70 1.22 2.70 1.22 13.97 — 0.30 5.32 3.42 2.15 3.42 2.15 9.28 — 0.43 7.64 4.35 3.04 4.35 3.04 7.15 — 0.18 30,143,419 1,985,498 2,760,496 4,377,368 7,137,864 — 7,137,864 — 7,137,864 15,413,509 22,551,373 31,414,129 4,389,122 3,855,227 4,018,093 7,873,320 — 7,873,320 — 7,873,320 13,709,110 21,582,430 37,068,785 6,019,226 3,248,926 7,727,169 10,976,095 — 10,976,095 — 10,976,095 15,770,549 26,746,644 43,060,731 5,529,279 6,444,865 8,476,704 14,921,569 — 14,921,569 — 14,921,569 18,174,166 33,095,735 48,420,848 5,902,428 3,542,899 15,940,099 19,482,998 — 19,482,998 — 19,482,998 18,543,970 38,026,968 2,468,190 (5,000,222) (2,532,032) — (107,325) — (2,639,357) — — 1,225,773 — 7,457 (1,406,127) 2,218,929 (638,436) 1,580,493 — (76,140) — 1,504,353 — 58,228 817,375 — 27,668 2,407,624 2,258,250 (2,588,219) (329,969) — (162,204) — (492,173) — (130,662) 2,395,332 — (11,024) 1,761,473 1,604,314 (5,510,634) (3,906,320) — (163,311) — (4,069,631) — 557,926 2,911,734 — (25,345) (625,316) 1,366,874 (7,048,194) (5,681,320) — (110,439) — (5,791,759) — 588,681 3,467,262 — 41,078 (1,694,738) 15,003,984 17.41 3,937,560 1,177,043 — 2,203,794 13,700,442 -9 2,905,220 1,088,568 — 1,534,223 14,976,836 9.32 3,788,925 1,316,604 — 1,670,323 16,327,800 9.02 4,213,690 1,201,419 — 2,414,032 16,591,914 4.28 4,317,907 1,184,265 — 1,985,476 Source: Company reports. Latin America High Yield November 8, 2012 242 Corporates Virgolino de Oliveira S.A. Açúcar e Álcool Full Rating Report Key Rating Drivers Ratings Virgolino de Oliveira S.A. Acúcar e Álcool Foreign Currency Long-Term IDR B Local Currency Long-Term IDR B National Scale Long-Term BBB(bra) First Debenture Issuance due 2014 BBB(bra) Virgolino de Oliveira Finance S.A. Foreign Currency Long-Term IDR B Local Currency Long-Term IDR USD300 Million Senior Unsecured Notes B B/RR4 IDR – Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR Stable Stable Financial Data Virgolino de Oliveira S.A. Acúcar e Álcool (BRL Mil.) Net Revenues EBITDA EBITDA Margin (%) Funds from Operations Total Debt Total Adjusted Debta Cash and Equivalents Total Debt/ EBITDA (x) Net Debt/ EBITDA (x) Total Adjusted Debt/ EBITDAR (x) Net Adjusted Debt/ EBITDAR + Dividends (x) 4/30/12 1,053 323 30.7 4/30/11 1,015 265 26.1 144 2,181 2,514 406 305 1,393 1,616 86 6.7 5.3 5.5 4.9 6.4 5.2 5.0 4.8 a Including off-balance obligations related to leased land (period of 12 months). Analysts Renata Pinho +55 11 4504-2207 renata.pinho@fitchratings.com Gisele Paolino +55 21 4503-2624 gisele.paolino@fitchratings.com Latin America High Yield November 8, 2012 High Leverage: Virgolino de Oliveira S.A. Açúcar e Álcool’s (GVO) ratings reflect its high leverage and tight liquidity position. For the LTM ended on April 30, 2012, GVO’s consolidated net adjusted debt/EBITDAR ratio, considering dividends received from Copersucar, was 5.0x, slightly above Fitch’s expectations of between 4.3x and 4.5x for this period. This increased leverage resulted from pressure on free cash flow (FCF) due to higher capital expenditures during the last harvest, including crop expansion. The strong U.S. dollar versus the Brazilian real also had a negative impact on foreign exchange variation and GVO’s debt. Strengthened Business Profile: GVO’s strategic shareholding in Copersucar (10.36% of its total capital) fundamentally supports its ratings and mitigates the risks derived from its middletier business position within the industry. GVO transfers 100% of its production to Copersucar, through a long-term exclusivity contract, mitigating demand risk. Prices are linked to the average sugar and ethanol market prices plus a premium, which is possible due to logistics savings and scale gains obtained through the partnership with Copersucar. GVO is remunerated by Copersucar based on the realized production (on a monthly basis) during the year, independently of the moment the sale to the final customer occurs. Weak but Improving Liquidity: GVO’s liquidity remains weak despite the long-term bond issued in February 2012. As of April 30, 2012, the group reported a cash position of BRL406 million, which covered only 64% of its short-term adjusted debt. Partially mitigating refinancing risk, GVO’s financial profile benefits from a significant working capital financing line in the amount of up to 40% of its annual revenues, equivalent to approximately BRL400 million, granted by Copersucar. This credit line is subject to certain limits in terms of revenues, and it is linked to guarantees on inventories and/or bank guarantees. Adequate Business Model: GVO’s business profile is positive, based on the favorable location of its mills, its diversified production base, and operational flexibility. The group consists of four industrial units located in the State of São Paulo, conveniently located near the main consumer markets and export channels. GVO has an installed crushing capacity for 12 million tons of sugar cane, with flexibility to reach up to 60% of total capacity for sugar or ethanol. The group benefits from sugar cane supply from its own and leased land for around 54% of its needs. The remaining 46% is supplied by third parties through long-term contracts, and there is no supply concentration above 5%. Industry Risks: The high volatile sugar and ethanol industry fundamentals; exposure to climatic conditions;, and challenges related to the ethanol industry’s dynamics in Brazil, currently strongly linked to gasoline regulated prices and government policies related to this issue, are further considered in the ratings. What Could Trigger a Rating Action Lower Cash Flow Generation: Negative rating actions could be driven by lower than expected operational cash flow generation or deterioration of GVO’s operating margins. Deleveraging Movement: Improvement in the group’s liquidity position coupled with a better balanced debt maturity profile and lower leverage levels could lead to a positive rating action. 243 Corporates Recovery Rating Fitch has performed a liquidation analysis for GVO in the event of bankruptcy. Fitch has also estimated the enterprise valuation in the event of financial distress. Under this scenario, we assumed a multiple of 5 times for the EBITDAR. Secured debt included debt from the Brazilian Economic and Social Development Bank (BNDES) and part of the group’s outstanding export financing transactions, which count on real guarantees. Fitch also conservatively assumed as secured debt part of the loans provided by Copersucar, which was equivalent to the inventories position reported in April 2012 (BRL111 million) since these loans are always backed by inventories/receivables or bank guarantees. The analysis suggests a higher recovery level of ‘RR2’ for GVO’s unsecured debt. The rating has been capped at ‘RR4’, which is the recovery rating cap for Brazilian issuers. The cap reflects concerns about the bankruptcy laws and the application of the law. GVO’s resulting recovery rating of ‘RR4’ indicates that the company’s creditors would have average recovery prospects in the range of 31%–50% of current principal and related interest in the event of default. Recovery Analysis Virgolino de Oliveira S.A. Açúcar e Álcool (BRL Mil.) IDR: B Going Concern Enterprise Value LTM EBITDAR as of April 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 390 0 390 5.0 1,949 Liquidation Value Cash Accounts Receivable Inventory Net PPE Total Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total (263) (67) (100) (430) Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 406 17 111 1,877 2,411 Advance Available to Rate (%) Creditors 0 80 13 50 56 20 375 — 445 1,949 195 1,754 Distribution of Value Secured Priority Senior Secured Lien 498 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims Unsecured Priority Senior Unsecureda Lien 1,683 Value Recovered 498 Recovery (%) 100 Recovery Rating RR1 Notching +3 Rating BB 1,754 498 1,257 63 1,194 Value Recovered 1,257 Recovery (%) 75 Concession Allocation (%) 100 Recovery Rating RR4 Notching 0 Rating B Note: Numbers may not add due to rounding. Source: Virgolino de Oliveira S.A. Açúcar e Álcool. Latin America High Yield November 8, 2012 244 Corporates Organizational Structure — Virgolino de Oliveira Group (As of April 30, 2012) Oliveira Family 100% 38.22% Agropecuária Nossa Senhora do Carmo S.A. 61.78% Virgolino de Oliveira S.A. Açúcar e Álcool 99.85% Agropecuária Virgolino de Oliveira S.A. 99.35% Açucareira Virgolino de Oliveira S.A. 99.94% Agropecuária Terras Novas S.A. 100% Virgolino de Oliveira Finance S.A. Source: Virgolino de Oliveira S.A. Latin America High Yield November 8, 2012 245 Corporates Debt and Covenant Synopsis Virgolino de Oliveira Finance S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Amounts Financial Covenants Limitation on Indebtedness Issuer Provisions Limitations with Respect to the Issuer Virgolino de Oliveira Finance S.A. (Luxembourg) Agropecuária Nossa Senhora do Carmo S.A., Virgolino de Oliveira S.A. Açúcar e Álcool, Acucareira Virgolino de Oliveira S.A. And Agropecuária Terras Novas S.A. Feb. 2, 2012 Feb. 9, 2022 Senior Unsecured Notes USD300 million Virgolino de Oliveira Finance Limited (Cayman Islands) Agropecuária Nossa Senhora do Carmo S.A., Virgolino de Oliveira S.A. Açúcar e Álcool, Acucareira Virgolino de Oliveira S.A. And Agropecuária Terras Novas S.A. Jan. 21, 2011 Jan. 28, 2018 Senior Unsecured Notes USD300 million Net leverage lower than 4.0x and 3.5x going forward. The company or restricted subsidiaries may not incur in additional debt if the net debt-to- EBITDA ratio is greater than 4.0 to 1.0 between the closing date and Oct. 31, 2012, inclusive, and 3.5 to 1.0 after Nov. 1, 2012. Net leverage lower than 4.0x and 3.5x going forward. The company or restricted subsidiaries may not incur in additional debt if the net debt-to-EBITDA ratio is greater than 4.5 to 1.0 between the closing date and October 31, 2011, 4.0 to 1.0 between Nov. 1, 2011 and Oct. 31, 2012, and 3.5 to 1.0 after Nov. 1, 2012. The issuer shall not, so long as any of the notes are outstanding, (1) engage in any business or enter into, or be party to, any transaction or agreement, with certain exceptions; (2) acquire or own any subsidiary or other assets or properties, with certain exceptions and (3) incur or suffer to exist any lien upon any properties or assets whatsoever, except (a) liens imposed by law and (b) any liens that in the aggregate are not material to the issuer. In addition, Agropecuária Nossa Senhora do Carmo S.A. must own, directly or indirectly, at least 75% of the shares of the issuer. The issuer shall not, so long as any of the notes are outstanding, (1) engage in any business or enter into, or be party to, any transaction or agreement, with certain exceptions; (2) acquire or own any subsidiary or other assets or properties, with certain exceptions and (3) incur or suffer to exist any lien upon any properties or assets whatsoever, except (a) liens imposed by law and (b) any liens that in the aggregate are not material to the issuer. In addition, Agropecuária Nossa Senhora do Carmo S.A. must own, directly or indirectly, at least 75% of the shares of the issuer. Debt Restrictions Limitation on Liens The company and any restricted subsidiary will not permit to issue or assume any indebtedness secured by a lien upon any property or assets without effectively providing that the notes shall be secured equally and ratable with such indebtedness so long as it shall be so secured. Limitation on Sale and Leaseback The company will not and will not permit any restricted subsidiary to Transactions enter into any sale and leaseback transaction, unless certain conditions are met. Acquisitions/Divestitures Limitations on Sales of Assets or The company and any restricted subsidiary will not make any asset Shares disposition unless some conditions are met, including, among others: (1) the asset disposition is for fair market value, (2) within 365 days after the receipt of any net available cash, proceeds may be used to permanently repay indebtedness, other than subordinated obligations; to acquire all or substantially all of the assets of a related business or to make capital expenditures. Net cash available not applied as per item (2) shall constitute “excess proceeds” and in case the latter reaches the issuer shall, within 30 days, make an offer to purchase notes, respecting certain conditions. The company and any restricted subsidiary will not permit to issue or assume any indebtedness secured by a lien upon any property or assets without effectively providing that the notes shall be secured equally and ratable with such indebtedness so long as it shall be so secured. The company will not and will not permit any restricted subsidiary to enter into any sale and Leaseback transaction, unless certain conditions are met. The company and any restricted subsidiary will not make any asset disposition unless some conditions are met, including, among others: (1) the asset disposition is for fair market value, (2) within 365 days after the receipt of any net available cash, proceeds may be used to permanently repay indebtedness, other than subordinated obligations; to acquire all or substantially all of the assets of a related business or to make capital expenditures. Net cash available not applied as per item (2) shall constitute “Excess Proceeds” and in case the latter reaches the issuer shall, within 30 days, make an offer to purchase notes, respecting certain conditions. Dividends and other Payment Restrictions Limitation on Dividend and Other With certain exceptions, the company will not, and will not permit any Payment Restrictions Affecting restricted subsidiary, to create or permit to exist any consensual Restricted Subsidiaries encumbrance or restriction on the ability of any restricted subsidiary to (1) pay dividends or make any other distributions on the capital stock of the restricted subsidiary owned by the company, to the company, or any restricted subsidiary; (2) to pay any indebtedness owed to the company or any restricted subsidiary; (3) make loans or advances to the company or any restricted subsidiary; or (4) transfer any of its properties or assets to the company or any restricted subsidiary. With certain exceptions, the company will not, and will not permit any restricted subsidiary, to create or permit to exist any consensual encumbrance or restriction on the ability of any restricted subsidiary to (1) pay dividends or make any other distributions on the capital stock of the restricted subsidiary owned by the company, to the company, or any restricted subsidiary; (2) to pay any indebtedness owed to the company or any restricted subsidiary; (3) make loans or advances to the company or any restricted subsidiary; or (4) transfer any of its properties or assets to the company or any restricted subsidiary. The company will not, and will not permit any restricted Limitation on Restricted The company will not, and will not permit any restricted subsidiary, subsidiary, directly or indirectly, to (1) declare or pay any Payments directly or indirectly, to (1) declare or pay any dividend except dividend except dividends or distributions payable solely in the dividends or distributions payable solely in the form of its capital form of its capital stock and except dividends or dividends stock and except dividends or dividends payable to the company or payable to the company or restricted subsidiary (on a pro rata restricted subsidiary (on a pro rata basis); (2) purchase or redeem basis); (2) purchase or redeem any capital stock of the any capital stock of the company held by persons other than the company held by persons other than the company or restricted company or restricted subsidiary (except for permitted investment); (3) purchase, acquire, or retire for value, prior to scheduled maturity, subsidiary (except for permitted investment); (3) purchase or acquire or retire for value, prior to scheduled maturity, any any subordinated obligations, with certain exceptions and (4) make subordinated obligations, with certain exceptions and (4) make any investment (other than permitted) in any person. any investment (other than permitted) in any person. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Continued on the next page. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 246 Corporates Debt and Covenant Synopsis Virgolino de Oliveira Finance S.A. (Continued) (Foreign Currency Notes) Others Limitation on Transactions with Affiliates With certain exceptions, the issuer will not, and will not permit any With certain exceptions, the issuer will not and will not permit restricted subsidiary, to make any payment, or sell, lease, transfer or any restricted subsidiary, to make any payment, or sell, lease, dispose of any of its properties or assets or enter into any transaction transfer or dispose of any of its properties or assets or enter or contract for the benefit of any affiliate. into any transaction or contract for the benefit of any affiliate. Consolidation, Merger, With certain exceptions, the company will not consolidate with or With certain exceptions, the company will not consolidate with Conveyance, Sale, or Lease merge into another person or convey, transfer or lease all or or merge into another person or convey, transfer or lease all or substantially all of its assets to any person. substantially all of its assets to any person. Cross Acceleration Cross acceleration of other debt with a USD15 million threshold. Cross acceleration of other debt with a USD15 million threshold. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 247 Corporates Financial Summary Virgolino de Oliveira S.A. Açúcar e Álcool (BRL Mil., As of April 30) Profitability Operating EBITDA Operating EBITDAR Operating EBITDA Margin (%) Operating EBITDAR Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDAR/Interest Expense + Rents Operating EBITDA/Debt Service Coverage Operating EBITDAR/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income LTM 4/30/12 2011 2010 2009 2008 323,117 389,817 30.7 37.0 16.5 (18.0) (20.0) 264,549 309,098 26.1 30.5 28.3 4.7 12.7 311,891 359,391 30.1 34.7 22.3 10.5 3.6 94,788 127,572 14.3 19.3 10.7 (17.0) (19.6) 62,446 88,846 15.6 22.3 N.A. N.A. N.A. 1.5 1.2 1.2 0.4 0.4 1.4 0.1 0.5 0.4 2.2 1.1 1.0 0.4 0.4 2.0 0.4 0.6 1.2 1.9 1.6 1.5 0.4 0.4 1.7 0.4 0.5 1.9 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.5 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.2 5.3 6.7 5.5 6.4 5.4 0.1 — 0.3 2.7 5.3 4.9 5.2 5.0 0.2 — 0.3 3.5 4.0 3.8 4.1 4.0 0.2 — 0.5 7.2 13.9 12.7 11.6 10.7 N.A. — 0.5 N.A. 16.6 15.1 14.0 13.0 N.A. — 0.4 2,773,214 405,746 635,079 1,545,501 2,180,580 — 2,180,580 333,500 2,514,080 364,979 2,879,059 2,268,347 85,598 429,871 963,185 1,393,056 — 1,393,056 222,745 1,615,801 502,519 2,118,320 2,233,871 40,349 574,102 666,697 1,240,799 — 1,240,799 237,500 1,478,299 432,577 1,910,876 2,320,134 111,104 627,221 685,648 1,312,869 — 1,312,869 163,920 1,476,789 441,910 1,918,699 1,425,181 90,622 415,258 618,515 1,033,773 — 1,033,773 211,200 1,244,973 260,051 1,505,024 143,781 (10,567) 133,214 — (323,087) — (189,873) — 28,381 481,640 N.A. 304,713 (37,716) 266,997 — (219,761) — 47,236 — 9,522 (11,509) N.A. 179,630 55,240 234,870 — (125,938) — 108,932 — 4,015 (183,702) N.A. 172,312 (47,234) 125,078 — (237,295) — (112,217) — (20) 108,958 23,761 143,781 (10,567) 133,214 — (323,087) — (189,873) — 28,381 481,640 N.A. — 320,148 — 45,249 — (70,755) — 20,482 — N.A. 1,052,795 4 126,817 263,465 66,700 (86,901) 1,014,544 (2) 204,044 249,891 44,549 59,297 1,036,728 57 184,091 198,555 47,500 15,625 661,856 66 33,813 N.A. 32,784 (68,727) 399,267 N.A. 2,636 N.A. 26,400 (46,574) N.A. – Not applicable. Source: Fitch. Latin America High Yield November 8, 2012 248 Corporates WPE International Cooperatief (WPEI) Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B+ B+/RR4 Local Currency Long-Term IDR B+ IDR Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR Stable Stable Financial Data Industrias Metalurgicas Pescarmona S.A.I.C y F. 6/30/12 12/31/11 (USD Mil.) (6 Months) (11 Months) Revenue 451.6 1,150.5 EBITDA Cash Flow from Operations Cash and Marketable Securities Total Recourse Debt Total Recourse Debt/EBITDA (x) Net Recourse Debt/EBITDA (x) 107.6 200.0 (143.8) (318.0) 60.8 95.8 957.8 835.4 4.6 3.8 4.3 3.4 Note: IMPSA changed to IFRS since April 2011 and changed the fiscal year end to December. Figures as of December 2011 are for eleven months and as of June 2012 are for six months. Ratios have been calculated by annualizing income statement and cash flow items of eleven months and six months, respectively. Ratings Based on Guarantor’s Creditworthiness: WPE International Coorperatief (WPEI) is a direct subsidiary of WPE, which in turn is wholly owned by Industrias Metalurgicas Pescarmona (IMPSA). WPEI’s notes are irrevocably and unconditionally guaranteed by IMPSA and WPE (IMPSA’s Brazilian subsidiary) on a senior unsecured basis. The ratings reflect the creditworthiness of IMPSA, which is rated ‘B+’. WPE is a fully owned subsidiary of IMPSA with strong operating, strategic, and financial ties to its parent company. The ‘B+’ IDR assumes all of WPEI’s future debt issuances would be guaranteed by IMPSA and will rank pari passu with IMPSA’s senior unsecured debt. IMPSA’s Positive Business Fundamentals: IMPSA’s ‘B+’ ratings reflect the positive trend for the company’s business fundamentals due to sustained global demand for hydro and wind power generating equipment. As of June 30, 2012, IMPSA’s backlog was USD3.6 billion. Approximately 79% of the backlog is in wind manufacturing, and 43% of these projects are in Brazil. This backlog level shows an improvement from USD3.16 billion during January 2011. The growth of IMPSA’s business in Brazil has reduced its exposure to more volatile markets such as Argentina and has increased its access to multiple funding sources. This has enabled IMPSA’s foreign currency rating to exceed the ‘B’ country ceiling of Argentina. Backlog Concentration Heightens Risk: IMPSA’s backlog concentration is high with five projects representing 56% of total backlog. The main project in the hydro equipment business unit is the Belo Monte hydro project in Brazil, whereas the main projects in the wind equipment unit are Arauco IV (Argentina) and Ceara III (Brazil). Negative Free Cash Flow: The company’s free cash flow (FCF) is anticipated to remain negative during 2012 and 2013 due to capital expenditures and growing working capital needs. Investments in the construction of wind farms are estimated at approximately USD450 million for FYE 2012 and USD560 million for FYE 2013. Much of the cash deficit will be funded with nonrecourse project financing for the wind farm projects in Brazil. What Could Trigger a Rating Action Changes in Financing Strategy: The ratings could be downgraded or have a negative outlook assigned if recourse financing increases above levels anticipated by Fitch, or if IMPSA changes its existing strategy of financing the development of wind farms with nonrecourse, project finance debt. Analysts Gabriela Catri +54 11 5235-8129 gabriela.catri@fitchratings.com Operating Issues: Any material performance problems that threaten future projects and cash flow, or a failure to comply with the terms for the operation of the wind farms (for which longterm PPAs have been signed with Eletrobras and the CCEE and are financed by BNDES), could also result in a Negative Outlook or downgrade. A sharp demand for wind farms would also be negative. Fernando Torres +54 11 5235-8124 fernando.torres@fitchratings.com Latin America High Yield November 8, 2012 249 Corporates Recovery Rating The recovery ratings for IMPSA’s capital markets debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery anticipated to be in the range of 30%–50%, which is consistent with Fitch’s RR4. Fitch discounts the company’s LTM EBITDA to a level that would cover operating leases, interest expenses, and maintenance capital expenditures. Fitch has applied a 4.0x distressed EBITDA multiple, which is slightly below the average ratio observed for many companies involved in diversified manufacturing and capital goods. Recovery Analysis Industrias Metalurgicas Pescarmona S.A.I.C. y F (USD Mil.) Going Concern Enterprise Value June 2012 Annualized EBITDA Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value 215.2 40 129.1 4.0 516.5 Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Estimated Maintenance Capital Expenditures Total 135.8 — 20.0 155.8 Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 516.5 51.6 464.8 Liquidation Value Cash A/R Inventory Net PPE Total 60.8 51.5 131.9 224.9 469.1 Advance Rate (%) 0 80 50 20 Available to Creditors — 41.2 66.0 45.0 152.1 Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims 464.8 — 464.8 Distribution of Value Secured Priority Secured Unsecured Priority Senior Unsecured Lien 0.0 Lien 957.8 Value Recovered — Recovery (%) 0 Value Recovered Recovery (%) 464.8 49 Concession Allocation (%) 100 Recovery Rating — Recovery Rating RR4 Notching — Rating — Notching Rating B+ Source: Fitch Ratings. Latin America High Yield November 8, 2012 250 Corporates Organizational Structure — WPE International Cooperatief June 2012 Summary Statistics USD107.6 Million of EBITDA (6 Months) USD60.8 Million of Cash and Marketable Securities USD1,343 Million of Total Debt USD958 Million of Total Debt with Recourse 100% Inverall Constr. S.A. (Brazil) 55% Energimp (Brazil) Industrias Metalúrgicas Pescarmona S.A.I.C. y F. 100% Guaranteed WPE (Brazil) 100% Venti Energia (Brazil) 45% FI-FGTS 100% WPE International Cooperatief (Netherlands) USD390 Million Senior Unsecured Notes Due 2020 Source: Fitch and Industrias Metalúrgicas Pescarmona S.A.I.C. y F. Latin America High Yield November 8, 2012 251 Corporates Debt and Covenant Synopsis WPE International Cooperatief (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change of Control Provision Restricted Payments Other Limitation on Business Activity Other, Relating to the Guarantors Additional Debt Restriction Restricted Payments Limitation on Liens Transactions with Affiliates Sale and Leaseback Transactions WPE International Cooperatief Industrias Metalurgicas Pescarmona and Wind Power Energia (WPE) Sept. 30, 2010 2020 Senior Guaranteed Notes N.A. N.A. Change of control clause at 101% of principal. The company will not declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities, or a combination thereof, with respect to any shares of its capital stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or set aside any amount for any such purpose, except for transactions in connection with the financing, directly or indirectly, of the guarantors and their subsidiaries from the net proceeds of the issuance of notes under the indenture and incidental and related activities, including any related swap transactions. The company will not engage at any time in any business or business activity other than the financing, directly or indirectly, of the guarantors and their respective subsidiaries from the net proceeds of the issuance of notes under the indenture and incidental and related activities, including any related swap transactions or holding investments in marketable securities, except as the trustee may otherwise approve if so directed by the holders of not less than 25% of the principal amount of the outstanding notes issued under the indenture. The company will not and will not permit any restricted subsidiary to incur in any indebtedness. Exceptions are: 1) on the date of such incurrence, the interest coverage ratio would be no less than 2x and total debt to EBITDA no greater than 4x; 2) no default or event of default shall have occurred. This covenant does not prohibit the incurrence of the following debt: 1) intercompany indebtedness within certain restrictions; 2) indebtedness represented by the notes, or outstanding on the issue date, or consisting on refinancing indebtedness; 3) hedging obligations; 4) subordinated indebtedness; 5) debt in an aggregate principal amount not exceeding USD50 million; 6) short-term debt for the ordinary course of business not exceeding USD40 million during the first year after the issuance, USD20 million prior to the second anniversary, and USD10 million thereafter; 7) debt in addition to that referred on 1 not exceeding USD100 million/USD75 million (year one from covenant changes as of May 2011)/USD50 million (year two)/USD25 million thereafter. The company will not and will not permit any of its restricted subsidiaries to: 1) declare or pay any dividend other than: a) dividends paid in shares of its common stock, b) dividends paid on a pro rata basis of the holders of such common stock; 2) purchase, redeem, or acquire any capital stock of the company or subsidiaries; 3) purchase, redeem, or retire for value, prior to scheduled maturity, any debt which is subordinated to the notes; 4) make any investments other than permitted investments. The company will not and will not permit any of the restricted subsidiaries to assume any lien (except for permitted ones) upon its property, unless at the same time the obligations under the notes are secured equally. The company will not and will not allow its restricted subsidiaries to enter into a transaction with affiliates, unless: 1) the transaction is on terms that are no less favorable than those that would have been obtained in a comparable transaction with a person that is not an affiliate; 2) the company delivers to the trustee: a) for transactions in excess of USD10 million, a resolution from its board of directors, b) for transactions in excess of USD15 million an opinion as to the fairness of that transaction from a financial point of view, issued by an international investment bank. The company or its restricted subsidiaries will not enter into any sale and lease back transactions unless pursuant to the provisions of the covenant described under “Limitation on Indebtedness.” N.A. – Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 252 Corporates Financial Summary — Industrias Metalurgicas Pescarmona S.A. (USD 000, Fiscal Year Ended Jan. 31 until January 2011; Dec. 31 since December 2011) Period-End Exchange Rate Average Exchange Rate Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed Charge Coverage FCF Debt Service Coverage (Free Cash Flow + Cash and Marketable Securities)/Debt Service Cash Flow from Operations/Capital Expenditures Capital Structure and Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds Secured Debt/Total Debt Short-Term Debt/Total Debt Debt with Recourse/EBITDA Net Debt with Recourse/EBITDA Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Debt with Recourse Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Other, Financing Activities Total Change in Cash Income Statement Net Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.4110 4.3053 4.1295 3.9787 3.9134 3.8340 3.7990 3.4855 3.1900 3.0905 3.0857 3.1080 3.0752 6 Months 6/30/12 11 Months 12/31/11 2011 2010 2009 2008 2007 107,609 24.12 200,048 17.39 183,805 18.10 (10.70) (26.70) 41.70 102,070 16.70 0.20 (4.80) 4.00 107,150 22.40 7.80 (51.30) 7.50 69,288 23.70 4.80 (4.80) 14.90 56,732 21.50 6.00 (14.70) 13.10 0.57 1.60 0.46 0.57 (0.46) (0.33) (1.74) 2.68 0.64 (1.74) (0.94) (0.65) (2.00) 3.20 0.80 (2.00) (0.90) (0.70) (3.20) 0.00 1.60 0.60 0.00 0.20 0.50 (0.70) 1.20 2.30 0.70 1.20 (1.30) (0.70) (6.30) 0.80 2.10 1.40 0.80 0.40 3.40 (1.00) 0.90 2.30 0.40 0.90 (0.10) 0.10 (9.30) 18.06 6.40 6.11 10.13 0.24 4.56 4.27 (8.47) 5.50 5.06 6.79 0.22 3.83 3.39 (7.60) 4.60 4.30 8.00 0.20 3.49 3.20 442.00 5.60 5.00 10.80 0.20 4.30 3.69 10.00 5.40 4.50 9.40 0.20 4.20 2.97 16.40 6.10 4.00 9.40 0.00 5.18 3.03 12.50 5.00 4.50 9.50 0.20 0.40 2,017,386 60,776 324,164 1,019,227 1,343,391 1,343,391 0 1,343,391 957,792 132,297 1,475,687 1,957,000 95,892 258,746 941,875 1,200,621 1,200,621 0 1,200,621 835,446 157,406 1,358,028 1,508,993 53,313 169,816 677,041 846,857 846,857 0 846,857 633,021 180,091 1,026,948 1,004,844 62,417 115,200 461,229 576,429 576,429 0 576,429 438,803 110,700 687,129 909,189 92,969 110,774 464,776 575,550 575,550 0 575,550 411,704 102,638 678,188 754,516 148,688 16,437 407,574 424,011 424,011 0 424,011 358,621 109,349 533,360 531,221 27,791 123,622 158,973 282,595 282,595 0 282,595 89,478 372,073 (29,269) (114,552) (143,820) 0 (33,772) 0 (177,592) 0 (1,824) 146,663 0 (32,752) (204,742) (113,328) (318,070) 0 (48,461) 0 (366,531) 0 (1,644) 415,751 0 47,576 (169,477) (36,434) (205,911) 0 (64,765) 0 (270,676) 0 159 261,562 0 (8,955) (60,750) 48,580 (12,170) 0 (17,051) 0 (29,221) (19,967) 15,631 20,545 0 (13,012) 10,747 (222,510) (211,763) 0 (33,652) 0 (245,414) (8,023) (11,552) 211,685 0 (53,304) (7,493) 373 (7,120) 0 (6,878) 0 (13,998) (35,844) 2,114 170,080 647 122,998 (2,226) (32,640) (34,866) 0 (3,748) 0 (38,614) (11,410) 27 52,403 2,189 4,595 451,599 — 89,913 67,875 0 (13,995) 1,150,532 — 169,350 74,735 0 47,858 1,012,939 65.8 160,540 57,312 0 60,963 610,964 27.7 87,098 62,054 0 4,287 478,472 63.8 94,961 46,959 0 7,916 292,163 10.9 55,074 33,356 0 14,807 263,504 8.9 43,863 24,874 0 10,690 Note: Numbers may not add due to rounding. Source: Industrias Metalúrgicas Pescarmona S.A.I.C. y F. and Fitch. Latin America High Yield November 8, 2012 253 Corporates Financial Summary Industrias Metalurgicas Pescarmona S.A. (ARS 000, Fiscal Year Ended Jan. 31 until January 2011; Dec. 31 since December 2011) 6 Months 11 Months 6/30/12 12/31/11 2011 Profitability Operating EBITDA 474,664 861.266 719,302 Operating EBITDA Margin (%) 24.1 17.4 18.1 FFO Return on Adjusted Capital (%) (10.7) Free Cash Flow Margin (%) (26.7) Return on Average Equity (%) 41.6 Coverage (x) FFO Interest Coverage 0.6 (1.7) (2.0) Operating EBITDA/Gross Interest Expense 1.6 2.7 3.2 Operating EBITDA/Debt Service Coverage 0.5 0.6 0.8 FFO Fixed Charge Coverage 0.6 (1.7) (2.0) FCF Debt Service Coverage (0.5) (0.9) (0.9) (Free Cash Flow + Cash and Marketable Securities)/Debt Service Coverage (0.3) (0.7) (0.7) Cash Flow from Operations/Capital Expenditures (3.2) Capital Structure and Leverage (x) 18.1 FFO Adjusted Leverage (8.5) (7.7) Total Debt with Equity Credit/Operating EBITDA 6.4 5.5 4.7 Total Net Debt with Equity Credit/Operating EBITDA 6.1 5.1 4.0 Implied Cost of Funds 10.1 8.2 7.3 Secured Debt/Total Debt Short-Term Debt/Total Debt 0.2 0.2 0.2 Debt with Recourse/EBITDA 4.6 3.8 3.5 Net Debt with Recourse/EBITDA 4.3 3.4 3.2 Balance Sheet Total Assets 9,126,251 8,425,474 6,003,831 Cash and Marketable Securities 274,940 412,844 212,117 Short-Term Debt 1,466,453 1,113,981 675,646 Long-Term Debt 4,610,779 4,055,053 2,693,744 Total Debt 6,077,232 5,169,034 3,369,390 Equity Credit Total Debt with Equity Credit 6,077,232 5,169,034 3,369,390 Off-Balance Sheet Debt 0 0 0 Total Adjusted Debt with Equity Credit 6,077,232 5,169,034 3,369,390 Total Debt with Recourse 4,332,860 3,596,846 2,511,827 Total Equity 598,483 677,682 716,528 Total Adjusted Capital 6,675,715 5,846,716 4,085,918 Cash Flow Funds from Operations (127,564) (881,476) (663,231) Change in Working Capital (499,263) (487,910) (142,580) Cash Flow from Operations (626,827) (1,369,386) (805,811) Total Non-Operating/Non-Recurring Cash Flow 0 0 0 Capital Expenditures (147,190) (208,639) (253,452) Dividends 0 0 0 Free Cash Flow (774,017) (1,578,025) (1,059,263) Net Acquisitions and Divestitures 0 0 0 Other Investments, Net (7,948) (7,076) 622 Net Debt Proceeds 639,217 1,789,931 1,023,596 Net Equity Proceeds 0 0 0 Other, Financing Activities 0 0 0 Total Change in Cash (142,748) 204,830 (35,045) Income Statement Net Revenue 1,968,2479 4,953,384 3,964,037 Revenue Growth (%) — — 69.2 Operating EBIT 391,876 729,102 628,256 Gross Interest Expense 295,827 321,755 224,286 Rental Expense 0 0 0 Net Income (60,995) 206,041 238,573 2010 2009 2008 2007 391,337 16.7 0.2 (4.8) 4.2 341,809 22.4 7.8 (51.3) 7.3 213,801 23.7 4.8 (4.8) 14.8 174,461 21.5 6.0 (14.7) 13.0 0 1.6 0.6 0 0.2 0.5 (0.7) 1.2 2.3 0.6 1.2 (1.2) (0.6) (6.3) 0.8 2.1 1.4 0.8 0.4 3.4 (1.0) 0.9 2.3 0.4 0.9 (0.1) 0.1 (9.3) 442.0 5.6 4.4 8.0 0.2 4.3 3.7 10.9 5.9 5.0 11.3 0.2 4.2 3.3 16.4 6.1 4.9 9.0 0 5.2 3.0 12.6 5.0 4.0 9.4 0.2 0.4 3,852,570 239,306 441,677 1,768,353 2,210,030 2,210,030 0 2,210,030 1,682,369 424,423 2,634,453 3,168,977 324,043 386,103 1,619,978 2,006,081 2,006,081 0 2,006,081 1,434,996 357,745 2,363,826 2,331,831 459,520 50,798 1,259,608 1,310,406 1,310,406 0 1,310,406 1,108,319 337,944 1,648,350 1,651,034 86,374 384,216 494,087 878,303 878,303 0 878,303 278,098 1,156,401 (232,915) 186,255 (46,660) 0 (65,375) 0 (112,035) (76,554) 59,930 78,770 0 0 (49,889) 34,283 (709,806) (675,523) 0 (107,349) 0 (782,872) (25,592) (36,852) 675,275 0 0 (170,041) (23,120) 1,150 (21,970) 0 (21,224) 0 (43,194) (110,605) 6,524 524,815 0 1,996 379,536 (6,846) (100,375) (107,221) 0 (11,526) 0 (118,747) (35,089) 83 161,151 0 6,732 14,130 2,342,436 53.5 333,935 237,915 0 16,435 1,526,327 69.3 302,925 149,798 0 25,252 901,527 11.3 169,943 102,928 0 45,691 810,326 14.2 134,889 76,492 0 32,873 Note: Numbers may not add due to rounding. Source: Industrias Metalúrgicas Pescarmona S.A.I.C. y F. and Fitch. Latin America High Yield November 8, 2012 254 Corporates YPF S.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured B B/RR4 Local Currency Long-Term IDR B National Long-Term Rating AA(arg) IDR Issuer default rating. Rating Outlooks Long-Term Foreign Currency IDR Long-Term Local Currency IDR National Long-Term Rating RWN Stable Stable RWN – Rating Watch Negative. Financial Data YPF S.A. (USD Mil.) Revenue EBITDA Cash Flow from Operations Cash and Marketable Securities Total Debt Net Debt To EBITDA (x) 6/30/11 12/31/11 6 Months 12 Months 7,013 13,730 1,862 3,397 1,976 3,092 102 2,351 339 2,965 0.6 0.9 Note: YPF changed to IFRS in January 2012. Figures as of June 2012 are sixmonth figures. Ratios have been calculated by annualizing income statement and cash flow items. Government Controlling Ownership: YPF S.A. is rated at the same level as Argentina following the government’s expropriation of Repsol’s 51% controlling stake in April 2012. The government divided the ownership of these shares between the federal government (51%) and the oil and gas producing provinces (49%). Government ownership generates uncertainty over the company’s future efficiency and profitability, as state-owned entities tend to incorporate more social considerations into their business strategy. Strong Business Position: YPF benefits from its strong business position in the domestic market and its vertical integration. Fitch Ratings expects that a state-owned YPF will take an active role in guaranteeing Argentina’s domestic oil and gas supply. This role might include managing natural gas imports, which in 2011 represented a cost of USD9.4 billion. Decreasing Reserves and Production Volumes: The historical decrease in reserve levels has resulted in weak operating metrics, which is reflected in the company reporting 5.6 years of reserves as of December 2011, which is well below Fitch’s optimal level of 10 years. YPF significantly improved its one-year reserve replacement (RRR) to 113% in December 2011 from 43% in 2009, although its three year RRR is still low at 80%. YPF has shown a renewed focus on its upstream business, which suggests the potential existence of significant resources. Low Debt Concentrated in the Short Term: YPF’s leverage is low at approximately USD2.3/barrels of oil equivalent (boe) as of June 30, 2012, but is expected to grow modestly following recent debt issuances. The company has indicated that it will fund a portion of its aggressive capex plan with additional debt. YPF’s debt profile is composed of 90% short-term debt, posing a refinancing risk that could result in a negative rating action. What Could Trigger a Rating Action Negative Drivers: Catalysts for a negative rating action include the adoption of political measures that negatively affect YPF’s efficiency and or profitability, high refinancing risk, and/or the downgrade of the Argentine sovereign rating. Positive Drivers: A positive rating action seems unlikely as YPF’s rating is linked to the sovereign, which is rated ‘B’ with a Stable Outlook. Liquidity and Debt Structure Analysts Ana Paula Ares +54 11 5235-8121 ana.ares@fitchratings.com Gabriela Curutchet +54 11 5235-8122 gabriela.curutchet@fitchratings.com Latin America High Yield November 8, 2012 Low Liquidity, High Short-Term Debt: YPF has low liquidity of USD102 million as of June 30, 2012, which compares to short-term debt of USD2.2 billion. Fitch expects the government’s controlling ownership in YPF to place it in a favorable position to rollover its short-term bank loans. YPF has recently issued approximately ARS1.5 billion, in three domestic bond issuances, for general corporate purposes. In July 2012, YPF purchased USD79 million of its 2028 bonds as a result of the activation of the change of control clause following the nationalization of Repsol’s stake. 255 Corporates Recovery Rating The recovery ratings for YPF’s capital markets debt instruments reflect Fitch’s expectation that the company’s creditors would have an average recovery constrained by the soft cap of ‘RR4’ for bonds issued by Argentine corporates. Using Fitch’s recovery rating methodology, the bondholder recovery value was assessed using the liquidation value of reserves, which is in line with Fitch’s sector-specific rating recovery methodology for oil and gas (detailed in the special report, “U.S. Exploration and Production Recovery Rating Methodology,” published March 20, 2008). Fitch used a USD10/boe reserve value for the company’s 1p reserves. Due to existing price caps on natural gas, Fitch has exclusively considered YPF’s oil reserves, which produced USD5.8 billion in gross liquidation value prior to administrative claims and concession payments to junior claimants. The model assumes a standard 10% administrative claims adjustment and 5% concession to junior claimants. Recovery Analysis YPF S.A. (USD Mil.) IDR: B Advance Available to Rate (%) Creditors 0 80 50 100 5,840.0 5,840.0 Going Concern Enterprise Value LTM EBITDA as of June 30, 2012 Discount (%) Post-Restructuring EBITDA Estimation Multiple (x) Going Concern Enterprise Value — 0 — 0 — Liquidation Value Cash Accounts Receivable Inventory Value of 1P Oil Reserve Total Post-Restructuring EBITDA Estimation Guidelines Interest Expense Rent Expense Est. Maintenance Capital Expenditures Total — — — — Enterprise Value for Claims Distribution Greater of Going Concern Enterprise or Liquidation Value Less Administrative Claims (10%) Adjusted Enterprise Value for Claims 5,840.0 584.0 5,256.0 Recovery Rating — — Rating — — 5,840.0 5,840.0 Distribution of Value Secured Priority Senior Secured Secured Lien 0.0 0.0 Value Recovered — — Concession Payment Availability Table Adjusted Enterprise Value for Claims Less Secured Debt Recovery Remaining Recovery for Unsecured Claims Concession Allocation (5%) Value to be Distributed to Senior Unsecured Claims 5,256.0 — 5,256.0 262.8 4,993.2 Unsecured Priority Senior Unsecured Unsecured Value Recovered 2,351.0 — Lien 2,351.0 — Recovery (%) 0 0 Recovery (%) 100 — Concession Allocation (%) 100 — Recovery Rating RR4 — Notching — — Notching 0 — Rating B — Source: Fitch. Latin America High Yield November 8, 2012 256 Corporates Organizational Structure — YPF S.A. (As of June 30, 2012) Summary Consolidated Statistics EBITDA Total Debt Total Debt/EBITDA Net Debt/EBITDA USD1.9 Billion USD2.4 Billion 0.6x 0.6x YPF S.A. (Argentina) 99.91% 50% 45% A-Evangelista S.A. (Argentina) Profertil S.A. (Argentina) Pluspetrol Energy S.A. (Argentina) 38% Compania Mega S.A. (Argentina) 42.86% 100% Inversora Dock Sud S.A. (Argentina) YPF Holdings Inc. (USA) 50% 30% 50.50% 10% 69.83% Refineria del Norte S.A. (Argentina) Oiltanking Ebytem S.A. (Argentina) Poligas Lujan S.A.C.I. (Argentina) Gasoducto del Pacifico (Argentina) Central Dock Sud S.A. (Argentina) 99.99% 36% 99.99% Operadora de Estaciones de Servicios S.A. (Argentina) Oleoducto Trasandino S.A. (Argentina) YPF Inversora Energetica S.A. (Argentina) 33.15% Terminales Maritimas Patagonicas S.A. (Argentina) 18% Oleoducto Trasandino Chile S.A. (Chile) 9.98% 99.99% YPF International S.A. (Bolivia) 45.337% Gas Argentino S.A. (Argentina) 70% 37% Oleoductos del Valle S.A. (Argentina) Metrogas S.A. (Argentina) 95% 2.27% Metroenergia S.A. (Argentina) Source: Fitch and YPF S.A. Latin America High Yield November 8, 2012 257 Corporates Debt and Covenant Synopsis YPF S.A. (Foreign Currency Notes) Overview Issuer Guarantors Document Date Maturity Date Description of Debt Financial Covenants Consolidated Net Debt/ EBITDA (Maximum) Interest Coverage (Minimum) Acquisitions/Divestitures Change-of-Control Provision/Nationalization Sale of Assets Restriction Debt Restriction Additional Debt Restriction YPF S.A. N.A. Nov. 10, 1998 2028 Senior Unsecured Notes N.A. N.A. In the event a nationalization takes place and is continuing, bondholders representing 25% of principal can request the issuer to repurchase the notes at 100% plus accrued interest. N.A. N.A. Limitation on Secured Debt N.A. Restricted Payments N.A. Other Cross Default N.A. Acceleration N.A. Restriction on Purchase of Notes The issuer may elect to redeem the notes in whole or in part at 10%. N.A. Not applicable. Disclaimer: The covenant summaries reflect Fitch’s interpretation and synopsis of information contained in publicly available documents identified in the “Document Date and Location” section of each covenant summary table. Fitch cannot ensure that the information contained in such documents is either accurate or complete, or that the covenant summaries, or any particular covenant summary, accurately or completely reflect the key terms of any such document. The information presented in the covenant summaries is provided “as is” without any representation or warranty and is not a substitute for information provided to investors by an issuer and its agents in connection with a sale of securities. Source: Company and Fitch Ratings. Latin America High Yield November 8, 2012 258 Corporates Financial Summary YPF S.A. (ARS Mil., Years Ended Dec. 31) Period-End Exchange Rate Average Exchange Rate Profitability Operating EBITDA Operating EBITDA Margin (%) FFO Return on Adjusted Capital (%) Free Cash Flow Margin (%) Return on Average Equity (%) Coverage (x) FFO Interest Coverage Operating EBITDA/Gross Interest Expense Operating EBITDA/Debt Service Coverage FFO Fixed-Charge Coverage FCF Debt Service Coverage (FCF + Cash and Marketable Securities)/Debt Service Coverage Cash Flow from Operations/Capital Expenditures Leverage (x) FFO Adjusted Leverage Total Debt with Equity Credit/Operating EBITDA Total Net Debt with Equity Credit/Operating EBITDA Implied Cost of Funds (%) Secured Debt/Total Debt Short-Term Debt/Total Debt Balance Sheet Total Assets Cash and Marketable Securities Short-Term Debt Long-Term Debt Total Debt Equity Credit Total Debt with Equity Credit Off-Balance Sheet Debt Total Adjusted Debt with Equity Credit Total Equity Total Adjusted Capital Cash Flow Funds from Operations Change in Working Capital Cash Flow from Operations Total Non-Operating/Nonrecurring Cash Flow Capital Expenditures Common Dividends Free Cash Flow Net Acquisitions and Divestitures Other Investments, Net Net Debt Proceeds Net Equity Proceeds Other (Investments and Financing) Total Change in Cash Income Statement Revenue Revenue Growth (%) Operating EBIT Gross Interest Expense Rental Expense Net Income 4.5238 4.3012 4.3053 4.1295 3.9787 3.9134 3.7990 3.7279 3.4700 3.1800 6/30/12a 2011 2010 2009 2008 8,167 26.4 — — — 14,029 24.7 42.6 (9.0) 28.0 14,748 33.4 48.7 (1.0) 30.5 11,831 34.5 40.7 (3.3) 17.8 11,440 32.8 51.3 (7.9) 15.7 13.7 11.9 1.4 13.7 0.4 0.4 1.2 12.3 12.8 1.5 12.3 (0.4) (0.3) 1.0 14.0 15.8 2.1 14.0 0.1 0.4 1.5 10.9 12.3 2.1 10.9 — 0.4 1.7 25.9 23.3 3.1 25.9 (0.6) (0.3) 1.9 0.6 0.7 0.6 12.7 — 0.9 1.0 0.9 0.8 10.7 — 0.6 0.6 0.5 0.4 12.7 — 0.8 0.7 0.6 0.4 17.0 — 0.7 0.4 0.4 0.3 18.0 — 0.7 66,151 460 9,892 743 10,635 — 10,635 0 10,635 27,219 37,854 55,399 1,461 8,113 4,654 12,767 0 12,767 0 12,767 18,735 31,502 46,589 2,527 6,176 1,613 7,789 — 7,789 — 7,789 19,040 26,829 40,283 2,145 4,679 2,140 6,819 — 6,819 — 6,819 18,881 25,700 39,079 1,216 3,219 1,260 4,479 — 4,479 — 4,479 20,356 24,835 8,754 (40) 8,714 0 (7,308) 0 1,406 0 0 (2,058) — 0 (652) 12,333 437 12,770 0 (12,289) (5,565) (5,084) 0 11 3,994 0 0 (1,079) 12,123 603 12,726 — (8,729) (4,444) (447) — 105 724 — — 382 9,513 (99) 9,414 — (5,636) (4,897) (1,119) — 33 2,016 — — 930 12,244 1,314 13,558 — (7,035) (9,287) (2,764) — (8) 3,140 — — 368 30,934 — 4,452 688 — 2,127 56,697 28.4 8,563 1,095 0 5,296 44,162 29 9,475 931 — 5,790 34,320 (2) 6,999 958 — 3,486 34,875 20 6,665 492 — 3,640 a June 30, 2012 six-month figures. Note: 1) YPF changed to IFRS in January 2012. Figures as of June 2012 are six-month figures. Ratios have been calculated by annualizing. 2) Numbers may not add due to rounding. Source: Fitch. Latin America High Yield November 8, 2012 259 Corporates Latin America Corporate Finance Team Directory United States Fitch Ratings Daniel R. Kastholm Group Head, Latin America Corporates Joe Bormann Basic Industries, Beverage Jose Vertiz Property/Real Estate, Homebuilding Viktoria Krane Food, Beverage & Tobacco, Beverage Lucas Aristizabal Utilities, Energy (Oil & Gas) Jay Djemal Metals & Mining Yolanda Torres Analyst Argentina Fitch Argentina Calificadora de Riesgos S.A. Cecilia Minguillón Sr. Director of Argentinian Corporates, Energy (Oil & Gas), Utilities Ana Paula Ares Energy (Oil & Gas), Utilities Gabriela Catri Infrastructure, Building Material, Construction Fernando Torres Metal & Mining, Building Material & Construction Juan Martin Berrondo Electric-Corporate Gabriela Curutchet Associate Director Brazil Fitch Ratings Brazil Ltda. Ricardo Carvalho Sr. Director of Brazilian Corporates, Utilities Jose Romero Homebuilding, Building Products Mauro Storino Telecom & Media, Utilities Fernanda Rezende Homebuilding, Retail, Pulp & Paper Renata Maria Pinho Electric-Corporate Gisele Paolino Transportation, Retail Débora Jalles Basic Materials, Airlines Gustavo Mueller Water/Wastewater Utility Liliana Yabiku Building Materials & Construction Ingo Bruno Santos de Araujo Transportation Pedro Carvalho Research Assistant Central America Fitch Costa Rica Calificadora de Riesgos, S.A. Vanessa Villalobos Utilities, Retail, Building Materials Allan Lewis Electric-Corporate Chile Fitch Chile Clasificadora de Riesgos Limitada Rina Jarufe Sr. Director of Chilean Corporates Alejandra Fernandez Building Materials & Construction Paula Garcia-Uriburu Natural Resources Monica Coeymans Forestry Products, Food & Beverage Francisco Mercadal Food, Beverage, & Tobacco Andrea Jimenez Property/Real Estate, Retailing Jorge Fiegelist Associate Director Valentina Pardo Food, Beverage, & Tobacco Josseline Jenssen Energy (Oil & Gas), Utilities Andrea Rojas Research Assistant Colombia Fitch Ratings Colombia Glaucia Calp Sr. Director of Colombia Corporates, Utilities Natalia O’Byrne Telecommunications, Retail, Water/Waste Utilities Maria Pia Medrano Electric-Corporate, Health Care Jorge Yanes Telecommunications Julian Robayo Water/Waste Utility Mario Irreno Cardenas Water/Waste Utility, Health Care Andres Ricardo Serrano Health Care Manuel Solorzano Research Assistant Mexico Fitch Mexico S.A. de C.V. Sr. Director & Co-Head of Mexican Corporates, Alberto Moreno Diversified Manufacturing, Media Sergio Rodríguez Sr. Director & Co-Head of Mexican Corporates, Telecom Rogelio Gonzalez Food & Beverage, Auto & Related Miguel Guzman Betancourt Retailing Indalecio Riojas Garza Natural Gas & Propane Alberto de los Santos Food, Beverage, & Tobacco, Auto & Related Velia Valdez Analyst Venezuela Fitch Venezuela, Sociedad Calificadora de Riesgos, S.A. Julio Ugueto Food, Beverage, & Tobacco, Homebuilding Telecom, Building Materials, Property & Real Estate, Jose Luis Rivas Energy (Oil & Gas) Latin America High Yield November 8, 2012 daniel.kastholm@fitchratings.com joe.bormann@fitchratings.com jose.vertiz@fitchratings.com viktoria.krane@fitchratings.com lucas.aristizabal@fitchratings.com jay.djemal@fitchratings.com yolanda.torres@fitchratings.com +1 312 368-2070 +1 312 368-3349 +1 212 908-0641 +1 212 908-0367 +1 312 368-3260 +1 312 368-3134 +1 312 606-2301 cecilia.minguillon@fitchratings.com ana.ares@fitchratings.com gabriela.catri@fitchratings.com fernando.torres@fitchratings.com juan.berrondon@ftichratings.com gabriela.curutchet@fitchratings.com +54 11 5235-8123 +54 11 5235-8121 +54 11 5235-8129 +54 11 5235-8124 +54 11 5235-8127 +54 11 5235-8100 ricardo.carvalho@fitchratings.com jose.romero@fitchratings.com mauro.storino@fitchratings.com fernanda.rezende@fitchratings.com renata.pinho@fitchratings.com gisele.paolino@fitchratings.com debora.jalles@fitchratings.com gustavo.mueller@fitchratings.com liliana.yabiku@fitchratigns.com ingo.araujo@fitchratings.com pedro.carvalho@fitchratings.com +55 21 4503-2627 +55 11 4504-2603 +55 21 4503-2625 +55 11 4504-2618 +55 11 4504-2207 +55 21 4503-2624 +55 21 4503-2629 +55 21 4503-2632 +55 11 4504-2208 +55 11 4504-2205 +55 21 4503-2602 vanessa.villalobos@fitchratings.com allan.lewis@fitchratings.com +506 2 296-9182 x29 +506 2 296-9182 x22 rina.jarufe@fitchratings.com alejandra.fernandez@fitchratings.com paula.garcia@fitchratings.com monica.coeymans@fitchratings.com francisco.mercadal@fitchratings.com andrea.jimenez@fitchratings.com jorge.fiegelist@fitchratings.com valentine.pardo@fitchratings.com josseline.jenssen@fitchratings.com.bo andrea.rojas@fitchratings.com +56 2 499-3310 +56 2 499-3323 +56 2 499-3316 +56 2 499-3314 +56 2 499-3340 +56 2 499-3322 +56 2 499-3341 +56 2 499-3300 +59 12 277-4470 +56 2 499-3337 glaucia.calp@fitchratings.com natalia.obyrne@fitchratings.com mariapia.medrano@fitchratings.com jorge.yanes@fitchratings.com julian.robaya@fitchratings.com mario.irreno@fitchratings.com andres.serrano@fitchratings.com manuel.solorzano@fitchratings.com +57 1 326-9999 x1110 +57 1 326-9999 x1100 +57 1 326-9999 x1130 +57 1 326-9999 x1170 +57 1 326-9999 x 1120 +57 1 326-9999 x1002 +57 1 326-9999 x1190 +57 1 326-9999 alberto.moreno@fitchratings.com sergio.rodriguez@fitchratings.com rogelio.gonzalez@fitchratings.com miguel.guzman@fitchratings.com indalecio.riojas@fitchratings.com alberto.delossantos@fitchratings.com velia.valdez@fitchratings.com +52 81 8399-9100 x133 +52 81 8399-9100 x135 +52 81 8399-9100 x134 +52 81 8399-9100 x 144 +52 81 8399-9100 x108 +52 81 8399-9100 x110 +52 81 8399-9100 x149 julio.ugueto@fitchratings.com +58 212 286-3356 joseluis.rivas@fitchratings.com +58 212 286-3356 260 Corporates ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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