Fitch lowers Grupo Elektra

Fitch Ratings said it downgraded Grupo Elektra, SAB de CV's long-term local-currency and foreign-currency issuer default ratings to BB from BB+ and national long-term rating to A+(mex) from AA-(mex).

Fitch also affirmed the national short-term rating at F1+(mex).

At the same time, Fitch said it downgraded Nueva Elektra del Milenio, SA de CV's (NEM) local-currency and foreign-currency IDRs to BB from BB+.

The outlooks for Elektra and NEM were revised to stable from negative.

The downgrade reflects Elektra's weaker corporate governance structure after a default of a related entity (TV Azteca). Elektra indirectly owns 22.5% of TV Azteca and is controlled by the same shareholder group, Grupo Salinas, Fitch said in a news release.

TV Azteca's decision to selectively default on its $400 million bonds by missing a $16.5 million coupon payment while using a portion of its $160 million cash balance to repurchase MXN 1,211 (approximately $58 million) of the outstanding Certificados Bursatiles through a market transaction and to keep current on a related party loan from Banco Azteca highlights potential conflicts of interest and different treatment to creditors, which underscore corporate governance concerns for the group, Fitch said.

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