Fitch downgrades NOVA by 3 notches to ‘B-’

02 February 2009 18:07  [Source: ICIS news]

NEW YORK (ICIS news)--Credit ratings agency Fitch Ratings downgraded NOVA Chemicals’ credit rating by three notches from ‘BB-’ to ‘B-’ based on new restrictions on its main $350m (€273m) revolving credit facility, the agency said on Monday.

NOVA’s bank group unanimously voted to provide covenant relief for the company in the first half of 2009, said Fitch. However, it have also required the company to come up with $200m in new financing over the first half of the year, comprised of a $100m financing requirement by 28 February and a second $100m financing requirement by 1 June.

“These financing requirements create considerable new hurdles for the company given the difficulties of locating new financing sources in today's high-yield chemicals markets,” said Fitch.

“They also suggest that the company’s bank group may be less willing to show forbearance than Fitch had previously considered,” the agency added.

NOVA’s $250m in 7.4% notes are coming due on 1 April, and the company also has $126m in preferred stock maturing on 31 October.

NOVA’s stock price has been hammered by concerns over its ability to refinance its debt.

Shares of NOVA fell 53 cents, or 30%, to an all-time low of $1.26 in early Monday morning trading. The decline comes on top of a 42% decline on Friday, 30 January.

Fitch noted that the company’s deeply depressed stock price makes equity financing a very dilutive option for the company at this point.

Fitch downgraded NOVA’s Issuer Default Rating to ‘B-”. The agency also downgraded NOVA’s senior secured revolver, unsecured revolver and notes, and preferred shares two notches from ‘BB+’ to ‘BB-’.

The ratings remain on Rating Watch Negative, said Fitch.

($1 = €0.78)

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By: Joseph Chang
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