Currently, San Miguel is one of the main exporters of lemons in the Southern Hemisphere and one of the main industrial producers of its by-products. The company processes approximately 18% of the world’s lemons, with export revenue accounting for nearly 80% of consolidated sales.
The company has just completed a transition process towards a natural ingredients-focused business model with greater value creation, lower working capital requirements and lower income fluctuations, while maintaining a clear export profile.
Long-term relationships with customers with very good credit ratings in the natural ingredients sector ensure greater income security, based on an interest rate specified in the contracts.
Likewise, the recent inaugurations of processing plants in Uruguay and South Africa with financing structures already agreed increase the company’s value and strengthen its proven access to financing.
In fact, according to the balance sheet and taking into account the $15 million convertible shareholder loan, the company’s net debt is $264 million, while equity has been reduced to $50 million in recent years.
The largest lemon producer wants to restructure its liabilities
Based on this scenario, San Miguel’s board has just announced a measure to improve and extend the maturity profile of part of its debt for several years.
This was done through the launch of a negotiable bond exchange (ON), which aimed to restructure a significant part of its short and medium-term liabilities as part of a common strategy for companies seeking to improve their liquidity and reduce the pressure of upcoming payments.
In the case of San Miguel, the process focused on offering holders of the ON Class X series; Class XI and Class XII the ability to exchange them for new negotiable Class XIII debt instruments.
This is part of the company’s need to manage a tight financial environment, prioritize liquidity and focus on generating revenue from new industrial projects.
The exchange offer, which can be viewed on the website of the National Securities Commission (CNV), was aimed at the holders of the ONs about to mature, to whom the company will issue new ONs of the class
Two suggestions from San Miguel
Exactly, The main feature was the extended running timewhich is intended to provide the company with financial relief and is divided into two classes.
The first is the dollar-denominated Series XIII Class A, which is planned to be integrated through the delivery of the series
The second offering focuses on the Series XIII Class B dollar-denominated ONs to be integrated through delivery of the series
In total, both ONs want to extend debt from up to $120 million to up to $250 million as part of their global program.
Additionally, San Miguel asked investors to agree to make some changes to the terms and conditions of the respective ONs.
As stated in the reflections on the topic, The consent “will be of full force and effect to the extent the relevant agreements are formed on or before the expiration date of the exchange offer.”
In this sense, the Exchange Offer is conditional on the valid delivery and acceptance of at least the Eligible ONs representing 70% of the total outstanding capital of each Series.
Conditional success
In addition, and as part of the terms and conditions of the proposal, the company indicates a capital amortization stating that the class
Scheduled repayments are then offered every six months or in interim installments with a significant final payment at maturity (the remaining capital).
The success of the exchange depends on investors agreeing to exchange their old securities for the new ones so that the transaction can be officially completed.
The offer start date was the last 10, while the first period starts on December 16 and ends on January 7, 2026.
But apart from the objectives that San Miguel has with this proposal, the ONs of the series received
Low rating
The advisory firm lowered the long-term issuer rating of San Miguel and the ONs from BBB+(arg) to BBB-(arg) and assigned the same category to the Series XIII ONs to be issued by the company, which it also classified as Rating Watch (Alert) Negative (RWN).
It also lowered its short-term issuer rating from A2(arg) to A3(arg) and its shares from Category 1 to Category 2.
The ratings take into account a high degree of dependence on the success of the stock exchange and current access to financing via largely guaranteed bank lines. In addition, it is taken into account that the necessary agreements have been made with international organizations to postpone financing maturities, allowing it to have sufficient liquidity to cover its current obligations.
The FIX report states: “The lack of an agreement with holders of ONs eligible for exchange and/or a deterioration in access to financing.” could mean another rating downgrade.”
The rating, in turn, reflects the expectation that San Miguel can gradually stabilize its margins through greater involvement in long-term contracts and improve its liquidity against current commitments.
“Adverse regulatory actions, changes in macro conditions or unfavorable climatic factors that imply a delay in the recovery of operating flows or further reduce the EBITDA margin, together with the inability to take measures to generate positive free cash flow over the rating horizon from the maturation of the businesses, could lead to a further rating downgrade,” the FIX report warns.
Change in financial strategy
Furthermore, it explains that “while the exchange offer is positive for the early refinancing of a portion of next year’s maturities, it does not eliminate the refinancing risk and continues with a high level of leverage,” the FIX SGC report highlights.
This behavior represents a change in financial policy and is therefore consistent with higher leverage and weaker credit metrics compared to the metrics previously considered, the document adds, which also mentions “uncertainty regarding the success of the exchange of the outstanding ONs for $110.6 million.”
For the rating agency, obtaining the minimum value of 70% would make it possible to partially settle next year’s maturities, and in the event of a successful exchange, the company will have to count on the cancellation of bank lines of at least $ 12 million and the refinancing of financial debt maturing in the amount of about $ 70 million in 2026, which poses a lower but real risk.
As of mid-year, FIX expected a significant reduction in San Miguel’s net debt in the second half of 2025, based on authorized capital contributions of up to $70 million to bring it from $220 million to nearly $150 million, and the execution of a $100 million long-term financing agreement to extend maturities in 2026.
However, several factors delayed the company’s plans, which ultimately led to a change in the achievement of the previously set goals.
In this sense, the FIX report states that in September last year the company achieved an EBITDA of $13.4 million, which is expected to reach $16 million at the end of the year, with investments totaling almost $30 million.
Going forward, the ratings agency “presents significant operational challenges given the uncertainty surrounding the extent and speed of recovery in operating margins, with interest coverage remaining tight in 2026 and EBITDA recovery in the coming years expected to reach levels above $40 million and margins above 25% of revenue by 2027.”
This data is based on a possible improvement in juice prices due to a decrease in lemon supply and increased efficiency through the integration of the recently inaugurated processing facilities in Uruguay and South Africa, which resulted in new long-term contracts that will allow the company to provide future inflows to the company.
The rating also takes into account the continued support of the control group shareholders, who in September 2023 granted a syndicated and subordinated credit facility of $45 million, which was integrated into the 2024 equity offering, thereby strengthening the capital structure.
In January of the same year, the company’s partner in South Africa subscribed to at least $11.5 million of the new shares to be issued by San Miguel and a market contribution of $9.6 million, while in April 2024, capital contributions of $67 million were integrated.
Likewise, this year the company received support from its shareholders amounting to $18 million through a syndicated capitalizable loan ($15 million) and the subscription of shares in Uruguay ($3 million).
“FIX will continue to monitor the debt exchange process, which, given the high maturity levels expected in 2026, allows for a significant improvement in the capital structure with extension of maturities, accompanied by an improvement in flow generation.” will be added in the report.
The company’s rating could be upgraded if it achieves faster-than-expected deleveraging through capitalization and/or EBITDA generation and inflows significantly above expectations, thereby reducing net leverage to levels below four times EBITDA.
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