Moody’s Flags Growing IUSA Risk

Moody’s has cut Industrias Unidas’ (IUSA) $200m in guaranteed senior unsecured notes due 2016 to Caa2 from Caa1 and also downgraded the corporate family rating to Caa1 from B3. It is keeping the ratings on review for possible downgrade amid weak liquidity, high refinancing risk and poor sales and profit performance. As of September 30, IUSA’s consolidated cash position covered only 10% of consolidated short term debt, amounting to about $270m, says Moody’s. Over 75% of short term debt was related to asset backed bank credit facilities available to IUSA’s US subsidiaries which expire in March and May and have not yet been renegotiated. “Moody’s believes that the elimination or reduction in size of these bank lending facilities could cause significant deterioration in IUSA’s liquidity profile, which requires external sources of funding,” says the agency. The Caa2 rating reflects Moody’s concern that the issuer and the guarantors of the notes may not have sufficient cash and operating cashflow to fund all coupon payments due over the next quarters. IUSA is one of Mexico’s largest diversified industrial groups, manufacturing copper-based and electrical products for the housing and electrical power sectors mainly in Mexico and the US.