S&P downgrades Grupo Idesa

S&P said it lowered the corporate credit rating on Grupo Idesa SA de CV to B+ from BB-.

The agency also said it lowered the rating to B+ from BB- on the company's $300 million 144A/Regulation S senior unsecured notes due 2020.

The 4 recovery rating, indicating 30% to 50% expected default recovery, is unchanged.

The outlook is negative.

The downgrades reflect the company’s weaker credit measures as a result of continued low oil prices, which have impaired the company's petrochemical revenues and EBITDA margins, S&P said.

Grupo Idesa continues to work on capital raising alternatives to improve its credit metrics, which were expected in 2016 but postponed, the agency explained.

Now, the company is expected to finalize a capital increase in 2017 with the aim to pay down debt, S&P said.

But the agency said there is uncertainly because capital increases ultimately depend on market conditions.

The company’s adjusted debt-to-EBITDA ratio will be nearly 10x through 2016, but the company is expected to benefit from additional cash flow from its investment in two new projects that start operating soon, S&P said.

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