Fitch Affirms Rtgs for SANLUIS Corporacion, S.A. de C.V. At 'B-/CCC+'

    CHICAGO--May 13, 2003--Fitch Ratings has affirmed its ratings of 'B-' to the senior secured debt obligations and 'CCC+' to the senior unsecured obligations of SANLUIS Corporacion, S.A. de C.V. (SANLUIS). The senior secured rating of 'B-' applies to the $268 million of bank loans that are held by SANLUIS' operating subsidiaries and are secured by assets, while the senior unsecured rating of 'CCC+' applies to the $50.2 million of 8% senior notes due 2010 and $76.2 million of 7% mandatorily convertible debentures due 2011. The Rating Outlook for all the ratings is Stable.
    Over the past year, SANLUIS' profitability margins have recovered after significantly declining in the two quarters following the company's default in September 2001. During the first quarter 2003, SANLUIS had an EBITDA margin of 15.9%, within its historical range.
    The completion of SANLUIS' debt restructuring process during January 2003 was positive as it resulted in the reduction of its debt burden by close to 25% and the lengthening of debt maturities. In addition, cash flow has improved as a portion of the company's debt has interest that is paid-in-kind rather than paid in cash. The resulting improvements in its debt profile have helped SANLUIS normalize its ongoing operations and to focus on improving its profitability.
    Nevertheless, SANLUIS continues to face a challenging operating environment for the auto parts industry. SANLUIS, which manufactures suspension and brake components primarily for export to original equipment manufacturers (OEMs), including Ford, DaimlerChrysler and General Motors, is exposed to the cyclicality of the United States auto industry.
    Notwithstanding the recent debt reduction, SANLUIS' debt leverage remains relatively high, with EBITDA generation of $73.6 million over the twelve months ended March 31, 2003 to total debt at slightly under 6.0 times (x). EBITDA/interest expense during the first quarter of 2003 was 1.8 times (x). On a cash basis, EBITDA/interest expense was 2.1x since interest on the 7% mandatorily convertible debentures due 2011 is paid-in-kind and capitalized rather than paid in cash.
    SANLUIS' total debt at March 31, 2003 was $434 million and is comprised of $38.9 million at the SANLUIS holding company level, $126.4 million at the SISA intermediary holding company level ($50.2 million in senior notes and $76.2 million in convertible debentures), $34 million at the brake group subsidiary level and $234.2 million at the suspension group subsidiary level. SANLUIS has no major capital expenditure needs over the near term. Debt levels are expected to remain stable going forward.
    SANLUIS manufactures suspension components (leaf springs, coil springs, torsion bars, bushings and stabilizer bars) and brake components (drums and discs). SANLUIS had $441 million in revenues in the 12 months ended March 31, 2003. SANLUIS is a supplier to OEMs such as Ford, DaimlerChrysler, General Motors, Nissan, Volkswagen, and Toyota.