AdcauicHERA
Santiago, 17 de octubre de 2013
Señor
Fernando Coloma Correa
Superintendente de Valores y Seguros
Av. Libertador Bernardo O’Higgins N* 1.449
PRESENTE
Ref.: Hecho Esencial
Sociedad de Inversiones Pampa Calichera S.A.
Inscripción Registro de Valores N* 0303
De nuestra consideración:
De conformidad a lo dispuesto por los artículos 9 y 10 de la Ley 18.045 de Mercado de
Valores y en la Norma de Carácter General N? 30 de la Superintendencia de Valores y
Seguros, y encontrándome debidamente facultado, comunico en carácter de hecho
esencial que con fecha 16 de octubre de 2013, la agencia clasificadora de riesgo
Standard 8: Poor’s Rating Services rebajó la clasificación de riesgo de Sociedad de
Inversiones Pampa Calichera S.A. de BB- a B+.
Adjunto a la presente una copia del respectivo comunicado de Standard €. Poor’s
Rating Services.
Sin otro particular, le saluda atentamente a usted,
Aldo Motta Camp —_-_-_-_-_–. +
Gerente General
Sociedad de Inversiones Pampa Calichera S.A.
C.C.:
Bolsa de Comercio de Santiago, Bolsa de Valores
Bolsa Electrónica de Chile, Bolsa de Valores
Bolsa de Corredores, Bolsa de Valores
Sociedad de Inversiones Pampa Calichera S.A. – El Trovador 4285, piso 11 xx Las Condes + Santiago, Chile Fono:(56-2) 429 4900 – Fax: (56-2) 429 4935 www.calichera.cl
STANDARD
POOR’S
RATINGS SERVICES
RatingsDirect’
Research Update:
Sociedad de Inversiones Pampa
Calichera Downgraded To ‘B+” From
‘BB-* On Weaker Financial
Performance; Outlook Stable
Primary Credit Analyst:
Cecilia L Fullone, Buenos Aires (54) 114-891-2170; cecilia.fullone(Vstandardandpoors.com
Secondary Contact:
Francisco Gutierrez, Mexico City (52) 55-5081-4407; francisco.gutierrez(Ostandardandpoors.com
Table Of Contents
Overview
Rating Action
Rationale
Outlook
Related Criteria And Research
Ratings List
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Research Update:
Sociedad de Inversiones Pampa Calichera
Downgraded To ‘B+’ From ‘BB-‘ On Weaker
Financial Performance; Outlook Stable
Overview
e Chile-based holding company Sociedad de Inversiones Pampa Calichera’s
financial performance has weakened as a result of higher debt and
expected lower dividends from its subsidiary, SQM.
* We have revised the company’s management £ governance (M*G) score to
“weak” from “fair.”
e We are lowering our rating on the company to ‘B+’ from ‘BB-‘.
e The stable outlook primarily reflects the group’s manageable debt
maturity profile.
Rating Action
On Oct. 16, 2013, Standard £ Poor’s Ratings Services lowered its ratings on
Sociedad de Inversiones Pampa Calichera S.A. (Pampa) to ‘B+’ from ‘BB-‘. The
outlook remains stable.
Rationale
The downgrade follows a deterioration in Pampa’s current and expected
financial performance, based on our expectations of lower dividends from its
subsidiary, Sociedad Quimica y Minera de Chile S.A. (SQM; BBB/Stable/–),
coupled with a higher debt burden. Following the recent sharp decline in SQM
share prices, Pampa has less room under some of its financial covenants. As a
result, we now assess the company’s liquidity as “less than adequate”.
In addition, we are revising our M£G assessment on Pampa to “weak” from
“fair.” The revision reflects a lack of clarity in the company’s strategy
including target leverage and debt allocation in each of its subsidiaries,
although we view the recently approved $120 million capitalization at Sociedad
de Inversiones Oro Blanco S.A. (Oro Blanco; not rated) as positive. Toa
lesser extent, recent investigations by the Chilean securities commission of
several of the company executives may pose additional uncertainties to our
analysis.
In our analysis of Pampa, we now follow a consolidated approach, given that
dividends that it receives are the main recurrent source of payment for the
group’s debt. In addition, cross-default clauses exist among the companies in
the group. In this sense, we incorporate the debt allocated at Pampa and at
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Research Update: Sociedad de Inversiones Pampa Calichera Downgraded To ‘B+’ From ‘BB-‘* On Weaker Financial
Performance; Outlook Stable
its controlling companies, Oro Blanco and Inversiones Norte Grande S.A (Norte
Grande, not rated) as well as at its sister company, Potasios de Chile S.A.
(Potasios, not rated). At the same time, we have considered dividends that
both Pampa and Potasios receive from SQM. As of June 30, 2013, total
aggregated debt for all of these companies was about $1.1 billion.
Due to SQM’s expected lower net income amid falling potash prices and with its
current dividend payout ratio at 50%, we believe the group will receive annual
dividends in a range of $60 million to $70 million, dow from $106 million in
2012. Under that scenario, we expect tighter coverage metrics, as seen in a
consolidated total cover ratio (dividends received/operating and tax charges
plus interest expenses and dividends paid) near 0.8x in the next 18 months,
compared with 1.1x in 2012. However, we expect the company to cover its cash
shortfalls with existing cash balances and continue to benefit from manageable
principal debt maturities.
The rating on Pampa continues to reflect our assessment of its business risk
profile as “weak” and financial risk profile as “aggressive.” Pampa’s business
risk profile mainly reflects the lack of diversification of its investment
portfolio, which consists of its equity stake in SQM, the source of dividends.
Also, despite Pampa’s active trading of SQM’s shares, we consider its
investment portfolio as less liquid than those of higher rated companies. This
is mainly because we believe that its reluctance to lose control of SOM limits
Pampa’s willingness to divest it, if necessary. Also, because SQM’s business
is in commodities, its net income is inherently volatile, and so are its
dividend payments, given that net income is the basis for calculating
dividends. Partly offsetting these factors is SQM’s relatively good credit
quality. Pampa’s “aggressive” financial risk profile reflects its volatile
cash flows, high leverage, and less-than-adequate liquidity.
As of the date of this report, Pampa has a direct 23.1% stake in SQM, Potasios
6.97%, and Potash Corp. of Saskatchewan Inc., the world’s largest potash
producer, has a non-controlling stake of 32%.
Liquidity
We now assess Pampa’s liquidity as “less than adequate,” as a result of a
perceived deterioration in the group’s financial flexibility and access to
refinancing markets, as well as narrower headroom under the covenants. This
is despite our expectations that the projected cash sources over uses would
exceed 1.5x in the next 12-18 months.
Under our revised projections, we believe that annual dividends from SQM would
not be sufficient to pay annual interests of $50 million, operating expenses
of $15 million, and dividends to the ultimate parent (at 30% of the group’s
net income). Nevertheless, the group has a comfortable cash balance of $126
million as of June 30, 2013, that it might use to finance any potential
deficit in the next two-three years.
In addition, the group benefits from a favorable maturity profile. After
canceling the $100 million debt with the proceeds from the recent capital
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Research Update: Sociedad de Inversiones Pampa Calichera Downgraded To ‘B+’ From ‘BB-‘ On Weaker Financial
Performance; Outlook Stable
increase, the group would not face principal debt maturities until 2016, when
debt for $160 million comes due.
Pampa and Potasios have covenants on their debt under which they have to
maintain a minimum investment on SQM. Although Pampa has sufficient headroom
under the covenants, given its large participation in SQM, Potasios is in a
much tighter situation. Incorporating the number of shares held by the
companies as of the end of August 2013, we believe SQM’s stock price should
fall around 15% from current levels to imply a potential breach of covenants
to Potasios, which will ultimately affect Pampa, given the crogs-default
clauses existing between the companies. We see the comfortable cash balances
held at Pampa as a mitigating factor, as they might also be used as collateral
for the debt, if required.
Outlook
The stable outlook incorporates the group’s manageable debt maturity profile.
The ratings may come under pressure if Pampa’s financial risk profile
deteriorates due to increasing debt, for example reaching a loan-to-value
ratio of more than 40% (based on the combined net debt of all the companies in
the group) or if coverage ratios weaken further (for instance, as a result of
lower dividends received from SQM) or if liquidity becomes weak (which could
result, for example, due to imminent risk of breach of covenants). An upgrade
is unlikely at this point because it would depend on a substantially lower
debt, which will offset some of the inherent volatility of Pampa group’s cash
flows and its portfolio concentration.
Related Criteria And Research
e Sociedad Quimica y Minera de Chile ‘BBB’ Ratings Affirmed Despite Recent
Potash Industry Developments, Outlook Stable, Aug. 16, 2013
e Methodology: Management And Governance Credit Factors For Corporate
Entities And Insurers, Nov. 13, 2012
e Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, Sept.
18, 2012
* Methodology And Assumptions: Liquidity Descriptors For Global Corporate
Issuers, Sept. 28, 2011
+ 2008 Corporate Ratings Criteria, April 15, 2008
+ Rating Methodology for Investment Holding and Operating Holding Companies,
Feb. 5, 2003
Ratings List
Downgraded
To From
Sociedad de Inversiones Pampa Calichera S.A.
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Research Update: Sociedad de Inversiones Pampa Calichera Downgraded To ‘B+’ From ‘BB-‘ On Weaker Financial
Performance; Outlook Stable
Corporate Credit Rating B+/Stable/– BB-/Stable/–
Senior Secured B+ BB-
Complete ratings information is available to subscribers of RatingsDirect at
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this rating action can be found on Standard £ Poor’s public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.
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