Moody’s drops Obrascon CFR, debt to B1

Moody's Investors Service said it downgraded the corporate family rating and senior unsecured debt ratings of Obrascon Huarte Lain SA to B1 from Ba3.

Concurrently, the agency downgraded Obrascon’s probability of default rating to B1-PD from Ba3-PD.

The outlook is negative.

"The downgrade primarily reflects OHL's weak operating performance and sustained negative cash flow generation, which is leading to higher-than-expected leverage. While the company has recently sold part of its equity stakes in Abertis and OHL Mexico in order to reduce debt, gross recourse leverage will remain weak with no prospects of recovery in the short term to levels commensurate with the previous Ba3 rating category," says Iván Palacios, Moody's vice president, senior credit officer and lead analyst for Obrascon, said in a news release.

"The downgrade also factors in the company's aggressive financial policies with extensive use of margin loans and its weak liquidity profile, despite the large value embedded in its equity stakes in Abertis and OHL Mexico. We also note the weakened credit profile of Grupo Villar Mir, OHL's controlling shareholder."

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