S&P Cuts Chile’s Iansa, Sees Sugar Risk

S&P has cut its corporate credit rating on Chilean sugar producer Empresas Iansa to BB minus from BB+ and removed the rating from credit watch, where it was placed with negative implications on November 20. “The downgrade reflects the deterioration in the company’s financial profile as a result of weakening conditions in its core sugar business and increased working capital requirements in its juice business. These factors led Iansa to increase its financial debt to $196m as of September 30, 2008, from $109m one year earlier, causing its liquidity position and credit metrics to weaken significantly,” says S&P. “We expect the fundamentals of the sugar business to remain vulnerable for the next two years, which will put significant pressure on Iansa’s financial profile,” adds the agency. For the 12 months to September, debt-to-total capital and debt-to-Ebitda jumped to 34.6% and 12.4x, respectively, versus 21.0% and 3.1x, as of December. “We expect some improvement in these metrics for 2009 and 2010, with total debt-to-total capital close to 30% and debt-to-Ebitda ranging from 4x to 5x,” adds S&P.