UpdateS&P joins Fitch in downgrading NOVA

02 February 2009 22:22  [Source: ICIS news]

(Adds updates throughout)

NEW YORK (ICIS news)--Ratings agency Standard & Poor’s (S&P) cut NOVA Chemicals’ corporate credit rating on Monday, joining Fitch in downgrading the petrochemical producer due to liquidity issues and new financing requirements.

S&P cut NOVA’s corporate credit rating three notches from ‘B+’ to ‘CCC+’ and kept it on CreditWatch with negative implications, it said on Monday.

“The three-notch downgrade reflects what we view as NOVA Chemicals’ liquidity issues in light of the large debt maturities it faces in the next 18 months, heightened risk of covenant violation in the second half of 2009, and expectations of weak cash flow generation because of what we see as a severe cyclical downturn in the industry,” said S&P in a research note.

The CreditWatch reflects concerns about NOVA being required to raise $100m (€78m) in financing by 28 February to retain access to its credit facilities, S&P added.

NOVA is facing significant debt maturities in 2009. Its $250m in 7.4% notes are coming due on 1 April, and the company also has $126m in preferred stock maturing on 31 October.

“Furthermore, there is a high probability that it will have to make an approximately $84m payment in early February relating to a forward contract,” said S&P.

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

Shares of NOVA fell 55 cents, or 31%, to an all-time low of $1.24 on Monday. The decline came on top of a 42% decline on Friday, 30 January.

“We believe the key to NOVA Chemicals’ survival in the next 18 months will be for it to shore-up sufficient liquidity through its banks and other financing alternatives to meet several large debt maturities and amend its covenants,” said S&P.

“However, this would be a daunting task in normal market conditions, let alone the current credit environment,” it added.

Earlier on Monday, credit ratings agency Fitch Ratings downgraded NOVA’s credit rating by three notches from ‘BB-’ to ‘B-’ based on new restrictions on its main $350m (€273m) revolving credit facility.

($1 = €0.78)

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By: Joseph Chang
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