Alpek, S.A.B. de C.V. -- Moody's assigned Baa3 rating to Alpek's proposed global notes

Mexico, November 07, 2012 -- Moody's Investors Service (Moody's) assigned a Baa3 rating to Alpek, S.A.B. de C.V.'s (Alpek) senior unsecured global notes for an amount up to USD600 million. The rating outlook is stable.

RATING RATIONALE

The rating is supported by Alpek's importance as a key player in the polyester industry where it has a significant share of North America's industry production capacity of PTA and PET, its efficient cost structure, its strong liquidity and sound credit metrics for the rating category, and our expectation that the company will successfully address its debt maturities in 2014 and beyond. The rating also incorporates a level of execution risk in integrating acquisitions, partially offset by its management team's track record in the M&A arena, the company's concentration on few raw material suppliers and customers, as well as its relatively limited growth potential in the North America PTA/PET industries over the medium term.

The stable rating outlook reflects our expectation that the company will be able to achieve its projected growth, complete the integration of its recent acquisition with no major operating problems, and refinance its sizable long-term debt maturities to improve its debt profile. The stable outlook assumes that the company will not engage in any major acquisitions that could materially weaken its current credit metrics.

Alpek is currently the largest petrochemical company in Mexico and the 2nd largest in Latin America with leading positions across its product portfolio. Alpek's strong market position mitigates the risk of potential import threats. In the polyester chain business, Alpek is the largest producer of PTA, PET and polyester fibers in the Americas. Alpek's PTA installed capacity of 2.7 million tons per year places it as the largest PTA producer in the Americas (ahead of BP which has in North America an installed capacity of approximately 2.4 million tons per year) and in fifth place worldwide.

Over the last three years the company has consistently increased its EBITDA margins, maintained leverage below 2.0x and kept a prudent dividend payout. Over the last twelve months ended June 30, 2012 EBITDA margin was 10.5% (in line with the 10.6% annual average over the 2009-2011 period) and Moody's adjusted Net Debt/EBITDA was 0.8x as of June 30, 2012. Historically EBITDA has provided strong interest coverage with Moody's adjusted EBITDA/Interest of 6.9x in the last twelve months ended June 30, 2012 (vs. 8.2x in 2011, 7.3x in 2010 and 6.0x in 2009).

An upgrade could be triggered in the medium term if credit metrics were to improve such that adjusted Debt/EBITDA falls close to or below 2.0 times and Free Cash Flow/Debt will solidly exceed 13% on a sustainable basis while maintaining EBITDA margin above 12%. An upgrade would also require that the company maintains strong liquidity and a comfortable debt maturity profile.

A downgrade could be triggered if credit metrics or margins weaken substantially, for example because of an acquisition that negatively affects the company's operation and/or credit metrics; higher than expected investment spending; debt-financed acquisitions that are not sufficiently free cash flow accretive or unexpected aggressive payouts to shareholders, with Debt/EBITDA increasing above 2.5x for a prolonged period of time without a clear path to subsequent de-leveraging.

The principal methodology used in rating Alpek, S.A.B. de C.V. was the Global Chemical Industry Methodology published in December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Alpek, S.A.B. de C.V. ("Alpek") is a wholly owned subsidiary of Alfa, S.A.B. de C.V. ("Alfa") a publicly traded Mexican company with four businesses: petrochemicals (Alpek), high-tech aluminum auto components (Nemak), refrigerated food (Sigma), and telecommunications (Alestra). Alpek produces PTA, PET and fibers in its polyester chain business and polypropylene, expandable polystyrene, polyurethanes, caprolactam, and fertilizers in its plastics and chemical business. Its products are mainly sold in the U.S., Mexico, Canada, Brazil and the rest of Latin America and are transformed into products ultimately sold in the food and beverage, consumer goods, textiles, and construction industries.

Since April 26, 2012, after Alpek's IPO, approximately 15% of the company is traded in the Mexican stock exchange. For the last twelve months ended June 2012, Alpek reported revenues of MXN98,844 million (around USD7.6 billion).

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