S&P Batters Lupatech Rating

Lupatech’s perpetual notes have been downgraded by S&P to CCC from B minus, with a stable outlook. The rating action is a result of persistently weak operating results because of cashflow generation, a highly leveraged capital structure and relatively tight liquidity, client concentration and low bargaining power as well as increasing requirements for capex and working capital, and low capacity utilization and challenges to ramp up production. Barclays says that the fact that BNDES is a lender and that Petrobras is the main offtaker of the company’s output helps mitigate some of the immediate default risk. However, it adds that in the short-term there is more downside than upside potential.