S&P cuts Corporacion Geo

Standard & Poor's said it lowered its long-term corporate credit rating on Corporacion Geo SAB de CV to BB- from BB, the national scale rating to mxA- from mxA and long-term domestic medium-term notes to mxA- from mxA. The agency affirmed the mxA-2 ratings on short-term debt programs.

The outlook is stable. All ratings were removed from CreditWatch, where they were placed June 18 with negative implications.

According to S&P, the downgrade reflects Geo's more aggressive financial policy and accounting practices, indicated by changes in its 2006 interim and audited financial statements, the use of financing schemes that require restricted cash balances and higher working capital requirements to sustain the company's growth targets.

The ratings also reflect the concentration of mortgage origination in Infonavit (BBB/stable/A-3) and the degree of political risk, the agency said.

The ratings also consider the company's position as a leading homebuilder in Mexico, its geographic diversification, product diversity and scale, S&P said.

The company's total debt-to-EBITDA ratio is about 1.7 times.

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