Moody’s Turns Negative Arauco

Moody’s has changed Arauco’s outlook to negative from stable, saying the Chilean company faces operating and credit protection challenges that could undermine its Baa2 rating. The agency says Arauco’s margins in 2009 have declined due to a deterioration in the global economy and sharp declines in volume and price across all business segments. Moody’s believes margin pressure will continue over the intermediate term despite recent benefits achieved from lower input costs. The previous day, S&P cut Arauco’s rating to BBB from BBB+ on weaker-than-expected projected financial performance that it says will likely prevent the company reducing short-term leverage. As of March 31, Arauco had about $2.7bn in financial debt. The total debt-to-Ebitda ratio is less than 3x.