S&P downgrades K+S to junk

S&P said it lowered the long-term corporate credit ratings on K+S AG to BB+ from BBB-, along with its short-term corporate credit ratings to B from A-3.

The agency also said it lowered the ratings on its senior unsecured debt to BB+ from BBB-.

The outlook is negative.

S&P also removed all of the ratings from CreditWatch, where they were placed with negative implications in August.

The downgrades result from the continued weak selling prices on international potash markets, combined with operational constraints at K+S’s German operations and an expectation of a somewhat delayed ramp-up for the company’s Canadian greenfield project, the agency explained.

So far this year, potash prices have been $30 to $40 below projections – with K+S competitor JSC Belaruskali signing key benchmark contracts with major customers, S&P said.

This price contraction stems from weakened supply-demand equilibrium and expectation of further capacity start-ups in 2017 to 2018, the agency said.

Prices are unlikely to recover significantly from current spot levels through 2018, S&P added, due to a likely continued weak supply-demand balance.

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