Standard & Poor“s (S&P) has placed its B long-term corporate credit ratings on Brunner Mond Group plc of the UK, and its C+ rating on the company“s US$ 125 million and UK 50 million senior subordina…
Standard & Poor“s (S&P) has placed its B long-term corporate credit ratings on Brunner Mond Group plc of the UK, and its C+ rating on the company“s US$ 125 million and UK 50 million senior subordinated notes, on CreditWatch with negative implications. The CreditWatch placement reflects the company“s significantly deteriorating performance since the beginning of this year, in combination with its aggressively leveraged financial position, S&P said. The weaker performance reflects lower soda ash prices – a consequence of increasing competition from US producers with access to cheaper technology – the favourable development of transatlantic shipping costs, and the suppliers“ shifting focus to European markets to compensate for weak demand in Asia. As a result, earnings before interest, taxes, depreciation, and amortization covered interest only 1.3 times in the financial year ended June, below expectations, S&P said. While competition from the US seems to have decreased over the last months, European soda ash prices are expected to remain under pressure in 2000 owing to the growing competition of Eastern European manufacturers which have available excess capacities, S&P noted. EBITDA coverage is, therefore, likely to deteriorate further in the course of the current financial year, a development which may be partly offset by the company“s ongoing cost containment programs, the agency said. With net debt to EBITDA coverage nearing 7 times, the company“s financial profile has reached a level at which it has become heavily reliant on external factors such as the outcome of negotiations with customers on next year“s soda ash prices, and the continued commitment of its senior lenders, the agency added. S&P is to meet Brunner Mond“s management during the next weeks to discuss these issues, it said.