[December 23, 2014]

Fitch Affirms Atento at 'BB'; Outlook Stable

Fitch Ratings has affirmed the Long-term foreign-currency Issuer Default Ratings (IDRs) for Atento LuxCo 1 S.A. (Atento) at 'BB' with a Stable Outlook. Fitch has also affirmed Atento's USD300 million senior secured notes at 'BB.'

KEY RATINGS DRIVERS

The ratings reflect Atento's third largest market position in the global customer relation management (CRM) outsourcing industry with its well-established long-term client relationship and geographical diversification. This has enabled the company's stable business growth and should support modest positive free cash flow (FCF) generation over the medium term under the solid industry growth outlook. Negatively, the ratings are tempered by intense competitive landscape and high customer concentration risk.

EBITDA Growth amid Stable Industry Outlook

Atento's EBITDA generation should continue to improve, on a local-currency basis, in most of its operational geographies, except Spain, backed by the increasing demand for CRM outsourcing service. Although the competitive landscape is intense due to new entrants and price-based competition for low-end services, the company's well-established market leading position as well as its increasing scope of advanced product offerings should help mitigate this risk and enable stable growth over the medium term. During the third quarter of 2014, Atento's advanced solution services represented 27% of total revenues, which compares to 22% from a year ago. In its key Brazil market, these services represented 37% of total revenues during the same period.

Leverage to Improve

Fitch forecasts Atento's net leverage to remain below 3.5x over the medium term mainly driven by higher EBITDA generation and modest positive FCF generation. The company's Cash flow from operation (CFFO) is forecast to be consistently above USD150 million annually and fully cover its capex, estimated to be around USD120 million in the medium term, in the absence of any sizable acquisition or shareholder distributions. In addition, a downward trend in rental expenses is positive leading to a lower level of off-balance sheet debt. Fitch forecasts the rental expense to represent less than 5% of the company's total sales, which compares to 7.9% during 2010, mainly driven by the company's relocation of its work stations to cheaper sites. As of September 2014, Atento's net leverage was 3.2x, which compares to 3.5x at end-2013.

Stable Operating Margins

Atento's EBITDAR margins should remain at around 16% in 2014 and 2015, compared to 14%-15% during 2012-2013, backed by its cost reduction initiatives. The company has coped with the increasing labor cost, the highest component of its cost structure representing 71.5% during first nie months of 2014, by relocating several working stations to cities that provide cheaper labor sources and a lower turnover. Atento also has taken other cost-cutting measures such as centralized procurement of operating equipment, and IT system transformation to improve productivity. Backed by these efforts, the company's EBITDAR margin improved to 16.1% during the LTM ended September 2014 from 15.1% in 2013.

High Customer Concentration

Atento is exposed to a significant customer concentration risk as it generates over 45% of total revenues from its largest client, Telefonica (News - Alert) Group. Positively, Fitch believes that this risk is alleviated by the service agreement with Telefonica which guarantees an inflation-adjusted revenue threshold until 2021 amid ongoing expansion of non-Telefonica client base enabling stable cash generation. In addition, the company boasts well-established long-term relationship with its clients as it generates close to 90% of its total revenue from clients who have contracted Atento for more than five years.

Sound Liquidity

Atento retained a sound liquidity profile as of Sept. 30, 2014 as the consolidated readily available cash, USD191 million, comfortably covered its short-term debt (only USD12 million). In addition, the company held USD53 million of short-term financial investments and an undrawn credit facility of EUR50 million. Fitch does not foresee any liquidity problem given long maturity schedules.

RATING SENSITIVITIES

Negative rating action can be considered in case of an increase in net debt to operating EBITDAR above 4x on a sustained basis, caused by a decline in operating margins, slower revenue growth, or continued negative FCF. In addition, the ratings could be pressured should the company's readily-available-cash-plus-CFFO to short-term debt ratio fall to below 1.5x.

Positive rating action in the short to medium term is not likely given the company's high leverage. Improvement in key operational metrics, such as reduced customer concentration, and higher diversification into and penetration of advanced solution offerings, as well as consistent positive FCF generation leading to its net leverage well below 3.0x on a sustained basis could be positive for the ratings.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014).

Applicable Criteria and Related Research:

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=961336

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