Gruma Descends Ratings Scale

S&P said it lowered Gruma’s long-term corporate and perpetual bonds ratings to B+ from BB, and left it on credit watch with negative implications to reflect a perception that leverage will increase and liquidity tighten because of unwinding of derivatives positions. Gruma’s $300m 7.75% perp traded unchanged at 42.0 between October 31 and November 7, according to Credit Suisse. As of September 30, Mexican corn flour and tortilla producer and distributor Gruma had $62m in cash and about $50 million in committed credit lines. Debt maturities total $58m in the fourth quarter of 2008 and approximately $90m in 2009, adds S&P. On October 13, the agency cut Gruma to BB from BBB minus based on a perception that financial policy had become more aggressive, as evidenced by continued use of derivatives. On October 28, Gruma reported mark-to-market losses of $788m on open foreign exchange derivative instruments with several counterparties. In addition, it reported that it had reached agreement to close derivatives positions with the only counterparty entitled to make margin calls. Gruma is expected to pay this settlement by November 25, S&P says. “The current rating incorporates our expectation that the company will achieve a resolution with the other counterparties to close its remaining derivative positions,” it adds.