Vitro Seen Headed for Default

Moody’s has cut Vitro’s senior unsecured debt and corporate family ratings to Ca (negative) from Caa1 amid fears that it may not be able to meet near term financial obligations. This includes a $45m coupon payment February 1 on 2012 and 2017 notes and an estimated $20m in long term debt maturities during Q1. “The company also has a contractual commitment to pay about $29m in remaining 10 monthly installments during 2009, related to the put option exercised by its Spanish joint venture partner in 2008,” says Moody’s. As of September 30, Vitro had $72m in unrestricted cash reserves, covering short term debt 0.46x, it adds. The Ca rating reflects the expectation of modest recovery for the senior unsecured debt class in the case of default. The negative outlook reflects the risk that ultimate recovery level may be lower, says Moody’s. Vitro is Mexico’s leading glass manufacturer with revenues of $2.75bn for the 12 months ended September 30. S&P and Fitch have also cut the credit over the last week. In the event of default Fitch expects recovery of 31%-50% on a total $1.225bn in bonds due 2012, 2013 and 2017.