Soriana Suffers for CP

Moody’s has chopped the Mexico’s Organizacion Soriana to Ba1 from Baa2 and kept a negative outlook amid fears about an aggressive liquidity profile caused by a shift towards CP issuance in recent months. The cut to junk affects MXP5.5bn in certificados bursatiles due 2012, MXP4.6bn in certificados bursatiles due 2010 and short-term debt of up to MXP6bn under the company’s MXP15billion certificados bursatiles program. “The downgrade also reflects Moody’s belief that Soriana may continue to maintain material short-term debt throughout 2009, which is contrary to the agency’s original expectations of short-term debt being largely eliminated by late 2008,” says the agency. It adds that uncommitted credit lines from certain relationship banks are not adequate CP backup, since their terms and actual funding remain subject to market conditions and are not legally binding. “The negative ratings outlook reflects the currently difficult and uncertain credit market conditions and the potential challenges these conditions may pose for the company’s liquidity requirements,” says Moody’s. It adds that Soriana maintains a negligible foreign currency exposure in its debt structure. Soriana is Mexico’s second largest food retailer in terms of revenues and one of the largest retail chains in Latin America.