Moody’s Assigns Baa3 Rating to Chilean Retailer Cencosud’s New $850 Million USD Senior Unsecured Notes

Moody’s Investors Service has assigned a Baa3 rating to Chilean retailer Cencosud’s recently issued $850 million USD-backed senior unsecured notes due in 2027. The outlook on the rating is stable for a transaction that is likely to improve the debt amortization schedule of Cencosud, according to the New York-based credit rating agency.

Moody’s said in a statement that it based its rating on the Santiago-based retailer’s large presence, market share, and geographic diversification throughout South America. Best known in Colombia for its Jumbo brand of hypermarkets, the company also operates in Chile, Brazil, Argentina, and Peru.

This spread is also a limiting factor, however. Moody’s cited the multinational’s “high leverage” in “challenging countries,” namely Brazil and Argentina, as a constraint on its rating.

But by and large, the agency is encouraged by Cencosud’s further push into the food retail sector, overall capital structure, and improving financial policies in recent quarters.

“The prospective cash tender and 2027 bond issuance, if and when successfully completed, are a modest credit positive for Cencosud as they will result in an extension of the company’s debt maturity profile and will slightly reduce its yearly cost of debt,” said Veronica Amendola, Moody’s lead analyst for Cencosud.

The new note issuance will be directed to tender Cencosud’s 5.5% senior notes due 2021 and 4.875% senior notes due in 2023 and “prepay other existing debt and for general corporate purposes,” stated Moody’s.

In addition to its retail operations in the Colombia, the company, which is 53.4% controlled by founder and chairman Horst Paulmann and his family, offers some financial products in the country in partnership with Colpatria, mainly through its Tarjeta Cencosud store credit card.

Cencosud is also present in the country’s real estate sector. Between Colombia, Chile, Argentina, and Peru, Cencosud has 54 shopping centers available for lease to third parties, according to Moody’s.

Moody’s currently has assigned Baa3 ratings to the following Cencosud senior unsecured notes, all of which have a stable outlook:

• Issuer rating, domestic currency: Baa3
• $750 million USD backed senior unsecured notes due 2021: Baa3
• $1.2 billion USD backed senior unsecured notes due 2023: Baa3
• $650 million USD backed senior unsecured notes due 2025: Baa3
• $350 million USD backed senior unsecured notes due 2045: Baa3
• $850 million USD backed senior unsecured notes due 2027: Baa3

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