Cencosud S.A. -- Moodys comments Cencosud's debt reduction from Scotiabank deal is a credit positive, but leverage still high

Buenos Aires City, April 23, 2015 -- Moody's comments that following Chilean regulators' approval on April 13th for the sale of 51% of its credit card business in Chile to Bank of Nova Scotia (Scotiabank, Aa2 negative (M)), we expect Cencosud S.A.(Baa3 negative) to use most of the USD 1.28 billion in proceeds to pay down debt, a credit positive. The amount, which includes a USD1 billion payment for the credit card portfolio funding, would strengthen its debt/EBITDA ratio to 4.6x, incorporating our standard adjustments, down from 5.7x as of 31 December 2014. The transaction will likely close by May 2015. Although positive, we still see the estimated debt levels as high for Cencosud´s rating category and, in the absence of asset sales or additional capital injections, we expect that further leverage reduction will be gradual over the next several quarters, reaching around 4x by the end of 2016.

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