Tuesday, 20 January 2009

S&P Cut IUSA Ratings, Citing High Debt and Decline in Construction Activity

Standard and Poor's cut Mexico's Industrias Unidas SA's credit ratings to CCC+ from B-, keeping the outlook on such ranking as negative (or that within the next six months they might be downgraded again.) The company is facing a decline in operating revenue due to fallout in the construction industry in Mexico and rising exposure to fluctuations in copper prices. The company, says S&P, is at risk of failing to refinance the credit facilities of its units int he U.S., which mature in March and May this year. IUSA had at the end of the third quarter cash of $35 million compared with maturing debts worth $221 million this year.

The construction industry in Mexico has been facing
imbalances over the past 18 months. The slowdown experienced in the sector has affected certain regions of Mexico more than others. Flattening home prices over the past year, especially for the low-income segment, have created stress for some mortgage lenders (e.g. Metrofinanciera.) Loan concessions, albeit increasing, are slowing drastically. Housing demand may not react to the lower prices anytime soon, as unemployment climbs and exports to the U.S. decline in the back of that nation's recession.

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