UpdateMoody's lowers NOVA as liquidity deadline looms

04 February 2009 22:00  [Source: ICIS news]

(adds paragraphs 1-14, comments from ATB Financial paragraph 20, updated share information paragraph 21)

HOUSTON (ICIS news)--Moody's Investors Service lowered on Wednesday its ratings for NOVA Chemicals, as a deadline approaches for the Canadian producer to raise $100m (€77m).

Moody's could lower NOVA again, depending on the company's chances of meeting the deadline, the ratings firm said.

The deadline is part of an amendment to a $350m revolving credit facility, Moody's said. If NOVA can raise $100m in financing by 28 February, it will receive covenant relief during the first quarter.

NOVA has another deadline on 1 June, under which it needs to raise an additional $100m, Moody's said. However, no covenant relief is connected to the 1 June deadline.

NOVA is approaching these deadlines while operating in a weakened economy.

The company posted a net loss of $214m for the fourth quarter, compared to a net gain of $126m in the year earlier period.

Moody's took NOVA's fourth-quarter performance into account, the firm said. Also, NOVA's price advantage in natural-gas feedstock has not sufficiently improved, Moody's.

Moody's lowered NOVA's corporate family rating to B2 from Ba3. NOVA's rating on unsecured notes fell to B3 from Ba3.

Moody's lowered NOVA's speculative grade liquidity rating to SGL-4 from SGL-3.

"The two notch downgrade reflects the increasing liquidity risk and the onerous terms under the new bank amendment," according to a statement by John Rogers, senior vice president at Moody's.

"Moreover, the ratings could be lowered in the next two weeks, if the company is unable to conclude the current negotiation for additional capital," Rogers said.

The capital infusion can be in the form of debt or equity, Moody's said.

While Moody's considers another downgrade, it will determine how much cash NOVA can raise from cost cutting and streamlining, the ratings firm said.

Moody's will also determine if NOVA can take any more steps to control inventory levels, the ratings firm said.

Earlier, shares of Canadian producer NOVA Chemicals rose 74% on the New York Stock Exchange, following a report that the company could reach a $100m (€77m) funding agreement.

So far, NOVA has made no further announcements about financing, said Greg Wilkinson, NOVA spokesman. "We remain confident about our ability to work with our lenders going forward."

According market sources cited by the Globe and Mail of Canada, NOVA may raise the $100m through a bond issue to Alberta Investment Management Corp (AIMCo).

A spokesman for AIMCo said the report was wrong.

NOVA could also borrow money from ATB Financial, the Globe and Mail reported.

A spokesman from ATB Financial said the company had not talked with NOVA, however.

Shares of NOVA reached $1.62 as of 16:04 hours New York time (19:23 GMT), up 52 cents.

($1 = €0.77)

For more on NOVA visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Al Greenwood
+1 713 525 2645

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