Grupo Famsa B de C : 'CCC-' 2024 note rating placed on creditwatch negative after announced liquidation Of bank unit

Research Update:

Grupo Famsa 'CCC-' 2024 Note Rating Placed On CreditWatch Negative After Announced Liquidation Of Bank Unit

July 2, 2020

Rating Action Overview

PRIMARY CREDIT ANALYST

• - On June 30, 2020, Mexican regulators notified Banco Ahorro Famsa S.A. Institucion de Banca Multiple (BAF), a subsidiary of Grupo Famsa, S.A.B. de C.V. (GFamsa), on the revocation of its license to operate as a commercial bank in Mexico. The government announced it will liquidate BAF, seeking to protect account holders.

  Santiago Cajal Mexico City + 52 55 5081 4521 santiago.cajal @spglobal.com

• - In our view, this event will severely disrupt the company's operations and could affect its debt-restructuring plan, involving the recent prepackaged Chapter 11 filing, in which the company sought to get judiciary approval to continue servicing unimpaired debt, meaning all obligations except 2020 notes.

  SECONDARY CONTACT

• - Moreover, on July 2, 2020, GFamsa announced that as a result of BAF's liquidation, it won't pay interest and principal on its local debt certificate with ticker GFAMSA 04819, and won't pay the interest on GFAMSA 06019.

Alexandre P Michel Mexico City + 52 55 5081 4520 alexandre.michel @spglobal.com

• - As a result, S&P Global Ratings is placing its 'CCC-' issue-level rating on the company's senior secured notes due 2024 on CreditWatch with negative implications, while we affirmed our issuer credit rating at 'SD'. The 2024 senior secured notes have a recovery rating of '3', indicating our expectation of meaningful recovery prospect of 50%-90%, in an hypothetical event of default on these notes.

• - The CreditWatch negative listing reflects a potential downgrade of the issue-level rating in the near term, depending on BAF's liquidation progress and its potential implications for GFamsa's operation and debt-restructuring plan.

Rating Action Rationale

The CreditWatch negative listing reflects greater uncertainty in the near term over the company's operation and debt-restructuring plan, which could impair its financial capacity to service its 2024 notes.

On June 30, 2020, the Mexican government announced the license revocation of BAF and its liquidation. BAF operated as the group's captive finance unit, enhancing GFamsa's retail sales through credit and representing a significant portion of the group's balance sheet. In our view, this recent development will affect the company's operation and capacity to service debt as it comes due in the foreseeable future, including the interest payment of its 2024 notes due Dec. 15, 2020. Moreover, on July 2, 2020, GFamsa announced that it won't pay interest and principal on one of its local debt certificates with ticker GFAMSA 04819, and won't pay interest due on another one with ticker GFAMSA 06019. The company made this decision as a result of BAF's ongoing liquidation.

The prepackaged Chapter 11 filing presented on June 26, 2020, included several motions recently authorized, which imply judicial approval for GFamsa to continue servicing debt not related to its 2020 notes.

CreditWatch

The CreditWatch negative listing reflects a potential downgrade of the 'CCC-' issue-level rating in the near term, depending on BAF's liquidation and its potential implications for GFamsa's operations and debt-restructuring plan. We expect to resolve the CreditWatch listing in the next 90 days or once we have more certainty on the company's debt restructuring plan and the company's operations, after BAF liquidation.

Related Criteria

• - General Criteria: Group Rating Methodology, July 1, 2019

• - Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019

• - Criteria | Corporates | General: Recovery Rating Criteria For Speculative-Grade Corporate

  Issuers, Dec. 7, 2016

• - Criteria | Corporates | Recovery: Methodology: Jurisdiction Ranking Assessments, Jan. 20, 2016

• - Criteria | Corporates | General: Methodology: The Impact Of Captive Finance Operations On

  Nonfinancial Corporate Issuers, Dec. 14, 2015

• - Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global

  Corporate Issuers, Dec. 16, 2014

• - Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

• - General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

• - General Criteria: Methodology: Industry Risk, Nov. 19, 2013

• - General Criteria: Methodology: Timeliness Of Payments: Grace Periods, Guarantees, And Use Of

  'D' And 'SD' Ratings, Oct. 24, 2013

• - General Criteria: Methodology: Management And Governance Credit Factors For Corporate

  Entities, Nov. 13, 2012

• - General Criteria: Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct. 1, 2012

• - General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

Ratings List

Ratings Affirmed

Grupo Famsa S.A.B. de C.V.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria atwww.standardandpoors.comfor further information. Complete ratings information is available to subscribers of RatingsDirect atwww.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website atwww.standardandpoors.com. Use the Ratings search box located in the left column.

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria atwww.standardandpoors.comfor further information. Complete ratings information is available to subscribers of RatingsDirect atwww.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website atwww.standardandpoors.com. Use the Ratings search box located in the left column.

Copyright © 2020 by Standard & Poor's Financial Services LLC. All rights reserved.

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites,www.standardandpoors.com(free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available atwww.standardandpoors.com/usratingsfees.

STANDARD & POOR'S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor's Financial Services LLC.