Moody's confirms Grupo Posadas

Moody's Investors Service said it confirmed Mexico-based Grupo Posadas SA de CV's Ba3 corporate family rating and Ba3 senior unsecured notes, concluding the review for downgrade begun on Dec. 2. The outlook is stable.

Moody's said the confirmation reflects the acceptable impact on credit metrics from the recent investment in Grupo Mexicana de Aviacion SA de CV and Moody's expectation that Posadas will not provide any financial support should Grupo Mexicana experience financial distress and that Posadas will reduce its investment to less than 30% over the near term from currently 49.7 percent.

The agency said Posadas' ratings continue to be supported by its leading position in the Mexican hotel industry; its strong brand name recognition, national coverage and business diversification; its expansion strategy; a track record of $20 million to $30 million in annual free cash flow generation and an experienced management team.

Moody's noted that benefits from the investment in Mexicana, such as cost savings and an improved competitive position, may be feasible but could be more than offset by risks related to the airline's weak financial and business profiles. Mexicana is highly leveraged, has tight liquidity, faces tough and growing competition on international and domestic routes, has an unfavorable cost structure and has been impacted by rising fuel costs and material labor obligations, the agency said.

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