Fitch Cuts Durango to B Minus

Fitch has chopped Mexico’s Corporacion Durango to B minus from B and its 2017 notes B/RR3 from B+/RR3, implying a 51%-70% recovery in the event of default. The ratings remain on rating watch negative and Fitch notes a deterioration in business and financial profile during the 12 months to March 31. “Durango is facing financial pressure due to rising input costs for old corrugated containers (OCC), a key raw material; OCC prices have escalated during the past 12 months due to the aggressive purchases of OCC in the US by the Chinese,” says Fitch. Durango has also been hurt by rising energy costs, it adds. “The increase in these two costs, plus other factors, have led to a rise in the company’s per-ton unit cost to $583 for the quarter ended March 31, 2008 from $506 during the same quarter in 2007. Price increases have not offset these costs increases,” says Fitch. The firm has $14m in short-term debt and $524m in long-term obligations.