Fitch Ratings has downgraded to 'B-' from 'B' the foreign and local currency Issuer Default Ratings for Camposol Holding Ltd (Camposol) and its wholly-owned subsidiary Camposol S.A. In addition, Fitch has downgraded Camposol S.A.'s USD200 million senior unsecured notes to 'B-/RR4' from 'B/RR4'. The Rating Outlook is Stable.

The downgrade of Camposol's ratings reflects the company's deteriorated credit profile. Camposol's gross leverage is above 5x due to weaker operating performance than initially anticipated and increased refinancing risk for its USD200 million unsecured notes maturing on Feb. 2, 2017. The company intends to refinance the debt early next year by accessing the bond market or through a syndicated credit loan. Fitch believes Camposol's improvement of its results and reduction of leverage may be delayed should adverse climatic conditions continue. Camposol's gross leverage remains high due to negative free cash flow generation (FCF) given the group's expansion plan coupled with low operating cash generation; completion of the expansion plan should aid financial recovery.

The ratings incorporate Camposol's leading position in the Peruvian agribusiness industry as a producer of asparagus and avocado, its vertical integration and strategic location, and its potential growth in new crops (blueberries) and businesses (shrimp). Camposol's valuable unencumbered land-bank and potential cash support from shareholders are also positively factored into the ratings.

Constraining factors for Camposol's ratings are its limited size and recent track record on launching new products as well as its vulnerability to climatic changes and price volatility. The 'B-/RR4' rating on Camposol's unsecured public debt reflects average recovery prospects in the event of a default.

KEY RATING DRIVERS

Weak Operating Performance:

Since third-quarter 2014 (3Q'14), Camposol has been reporting weak operating results. This was due to lower prices for avocados because of overproduction and higher fixed costs due to inefficiencies in the distribution system in 2014. In 2015, the volume of asparagus and shrimp yields were negatively impacted by the 'El Nino' phenomenon. For LTM ended June 2015, EBITDA was USD20 million (USD34 million and USD43 million in 2014 and 2013, respectively). For 2015, Fitch expects a recovery of the performance in the second-semester due to seasonality of the production (60% of Camposol's sales is concentrated in the second half of the year) and better performance from avocados as a large portion of the production is now sold directly to retailers. For YE2015, Fitch projects an EBITDA similar to 2014. For the next years, Fitch expects revenues and EBITDA to recover thanks to increased blueberries and avocado production as new planted hectares are entering into more maturity phases (57% of planted areas are in mature fields). Fitch also expects improvements on shrimp yield production due to investments in intensive ponds.

Increased Leverage:

Camposol's gross and net leverage ratios were at 13.5x and 11.9x respectively as of June 2015, showing an upward trend since 2014. Leverage increased because of the deterioration on operating cash flow generation while the company continued executing its business plan oriented to increase and diversify its product portfolio. As of LTM ended June 2015, FCF was negative US$32 million mainly due to capex allocated to improve the packing facility and asparagus fields and increase the size of its blueberry plantations. Additionally, in November 2014, Camposol acquired three seafood processing plants and doubled its shrimp ponds. For 2015 and 2016, Fitch expects FCF to be slightly negative or neutral as major investments have been done while gross leverage should reduce toward 5x following higher production and operating cash flow recovery.

Exposure to Climatic Risks and International Prices:

Camposol is exposed to seasonality, volatility on prices and external factors such as climatic events like 'El Nino' or 'La Nina' phenomenon and/or proliferation of existing or new plagues. All of which could negatively impact production yields and cash flow generation. In the last five years, Camposol has faced several 'El Nino' phenomena (every one or two years) that have negatively impacted asparagus crops as well as shrimp yields due to higher mortality. Despite doubling its ponds for shrimp farming, Camposol's gross profit of this activity significantly reduced in the first-semester of 2015 (1S'15) due to lower yields and price reduction.

High Product and Geographical Concentration:

Camposol's product, customer and regions are concentrated. 100% of production is located in the north of Peru. The company has been diversifying its production, but 40% of Camposol's revenues are still based on two products (asparagus and avocado). Any variation in prices, costs and volumes of these products have an important impact on the company's results. In addition, 90% of Camposol's revenues are originated in Europe (40%) and the United States (50%).

Leading position in Peru:

Camposol is a leading agro-industrial vertically integrated company in Peru, offering fresh, preserved and frozen products. It is also involved in the harvest, processing and marketing of agricultural products such as avocado, asparagus and blueberries and farming of shrimp. Camposol's competitive advantages are due to its vertical integration on production and strategic location as well as its owned-valuable land-bank. Camposol also benefits from the worldwide trends toward the consumption of healthy products and the opening of the U.S. market for the Peruvian Hass avocado since 2011.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

--Increasing production mainly in blueberries and avocados as new plantations are entering into mature phases;

--Recovery in shrimp production and processing other seafood products in order to maximize utilization capacity of new facilities;

--Three-year average prices for most agriculture products and price reduction for shrimp as it increased at high levels in the last two years due to diseases in Asia production;

--Fixed costs reduction at about 20% in 2015 following the company's efforts toward savings and efficiencies;

--Improvement of working capital due to inventories reduction;

--Capex at around USD30 million for 2015 and USD15 million per year for 2016 and 2017;

--No dividend payments;

--Successful refinancing of the USD200 million senior unsecured notes prior to maturity;

--Shareholders' tangible support if needed;

--A strong 'El Nino' impact is not considered into base case assumptions.

RATING SENSITIVITIES

Negative Rating Action: Factors that could lead to a rating downgrade include failure to refinance by mid-2016, further deterioration of Camposol's liquidity without any tangible support from shareholders and/or profitability as a result of lower production volumes and yields due to climatic events. Another potential detriment to Camposol's ratings would be a decline of product prices due to lower demand for its key markets resulting in gross leverage levels consistently above 6.0x. Shareholder-friendly actions such as aggressive dividend payouts and/or debt-funded acquisitions negatively affecting Camposol's credit profile could also lead to Fitch taking a negative rating action.

Positive Rating Action: Factors that could lead to Fitch taking a positive rating action would be successful refinancing coupled with improvement in Camposol's cash flow generation leading to lower gross adjusted leverage at levels consistently below 5.0x and a solid liquidity.

LIQUIDITY

Camposol's liquidity has deteriorated over the last year. As of June 2015, liquidity relies primarily on cash on hand of USD30 million which only covers 0.5x the adjusted short-term debt of USD57 million. The interest coverage ratio (EBITDA/interest) deteriorated to 0.8x as of LTM June 2015 from 1.5x in 2014 and 2.2x in 2013. Fitch expects this situation to improve in the second-half of this year following improved avocado sales. The company intends to refinance its bond early next year. Camposol's debt is mainly composed of its USD200 million unsecured bond due on Feb. 2, 2017. Fitch expects cash support would be provided by shareholders if liquidity deteriorates further.

FULL LIST OF RATING ACTIONS

Fitch has downgraded the following ratings:

Camposol Holding Ltd.

--Long-term foreign currency IDR to 'B-' from 'B';

--Long-term local currency IDR to 'B-' from 'B'.

Camposol S.A.

--Long-term foreign currency IDR to 'B-' from 'B';

--Long-term local currency IDR to 'B-' from 'B';

--Senior unsecured notes to 'B-/RR4' from B/RR4.

The Rating Outlook is Stable.

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Parent and Subsidiary Rating Linkage (pub. 10 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869363

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers (pub. 12 Jun 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867275

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Fitch RatingsPrimary AnalystJohnny Da Silva, +1-212-908-0367DirectorFitch Ratings, Inc.33 Whitehall StreetNew York, NY 10004orSecondary AnalystJosseline Jenssen, +511-372-0681DirectororCommittee ChairpersonDaniel R. Kastholm, CFA, +1-312-368-2070Regional Group Head - Latin AmericaorMedia RelationsAlyssa Castelli, +1-212-908-0540 (New York)alyssa.castelli@fitchratings.com