Moody's downgrades SanCor

Moody's Investors Service said it downgraded Argentina-based SanCor Cooperativas Unidas Ltda.'s global local currency rating for senior secured debt to Caa3 from Caa1 and national scale rating to Caa3.ar from Ba3.ar. The outlook is negative.

The agency said the downgrade reflects the increasing likelihood of another debt restructuring and the reduction in likely recovery values given the adverse impact of recently introduced government measures on its cash flow generation and liquidity profile. Moody's noted that SanCor has already begun discussions with creditors regarding covenant relief.

In the second half of 2005, the Argentinean government introduced pricing limits on certain products domestically and increased taxes on exports. Combined with the company's already-tight financial situation, this government action halted SanCor's incipient recovery and negatively impacted profits and cash generation. Moody's said SanCor's operating performance has weakened significantly over the two first quarters of financial year 2005/2006, resulting in negative free cash flow generation.

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