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Investing.com -- Moody’s Ratings has confirmed the Baa3 rating of CI Banco, S.A. Instit. de Banca Mult. F/00939 (Terrafina) on its senior unsecured notes due in 2029, and has revised the outlook to positive. This confirmation and outlook change wrap up the review process that began in November 2024.
The positive outlook is a reflection of Moody’s expectation that Terrafina will enhance its financial performance and credit metrics as part of Fibra Prologis (NYSE:PLD), a leading public Mexican company in the industrial real estate sector. By the close of 2024, Fibra Prologis had an industrial portfolio of 509 properties, primarily in the logistics and manufacturing industries across Mexico, totaling 87.1 million square feet of gross leasable area.
This optimistic outlook is also influenced by the strong support from Fibra Prologis to Terrafina and their combined efforts to enhance Terrafina’s credit profile. Terrafina has been diligently managing its liabilities, reaching a secured debt to gross assets ratio of 0%, equivalent to a solid assets pool base of 100% unencumbered assets. This strategy aligns with Fibra Prologis’s near-term plans for Terrafina, which include the sale of non-core assets. The execution of this plan is scheduled to begin in the second quarter of 2025 and is expected to conclude in 2026, with the company aiming to raise between $100 million and $400 million.
Despite the improvements in Terrafina’s debt profile, there is still potential for improvement in the company’s liquidity. At the end of 2024, Terrafina had $60 million (MXN $1.21 billion) in cash and $275 million available in a revolving credit line. This compares to roughly $367 million (MXN $7,527 million) of debt maturities in 2025. New debt issuances are expected to refinance short-term maturities and the cash position will be reinforced with the proceeds from the sale of assets.
Terrafina’s new management is expected to implement the same management and governance standards observed in Fibra Prologis, which has a long track record of solid reputation and strong market position.
The Baa3 rating takes into account Terrafina’s position as one of the largest players in the Mexican real estate market and its role as a core business within Fibra Prologis operations in Mexico. The rating also incorporates the company’s stable credit profile, supported by steady cash flows from its high-quality industrial portfolio, now with stronger support from Fibra Prologis’s experienced management team.
Terrafina is expected to continue demonstrating adequate credit metrics for an investment-grade company, keeping leverage metrics at levels between 30% and 50%, fixed charge coverage ratio at levels close to 3.5x, and maintaining its 100% unencumbered asset base. Terrafina should also be able to capitalize on new opportunities arising from Fibra Prologis’s ownership, which boasts a more robust operational performance, disciplined approach to capital management, and stronger access to capital sources.
Fibra Prologis is part of Prologis, L.P. (A2, STA), a global leader in logistic real estate in markets with high barriers to entry. Prologis has approximately 6,700 customers in 19 countries across the Americas, Europe, and Asia and has a strong liquidity profile, supported by healthy cash flow generation, robust in-place net operating income (NOI), and over $6 billion in liquidity as of December 31, 2023.
Terrafina’s rating could be upgraded if the company continues capitalizing on the opportunities coming from the new experienced management and takes advantage of Fibra Prologis’s robust operational performance and stronger access to capital and liquidity, along with maintaining adequate credit metrics. However, the rating could be downgraded if the company experiences any significant liquidity challenge or occupancy levels are sustained below 95%.
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