VTO.N VITROA.MX to 'BB-' from 'BB'. The downgrade reflects the continued increase in the Mexican company's debt leverage relative to its cash flow generation over the past two years, a result of the economic slowdown in Mexico and the U.S.
The outlook is negative. Standard & Poor's also lowered the rating of Vicap S.A. de C.V.'s 11.375% notes due 2007 to 'B' from 'B+'. The lower rating on the notes reflects the structural subordination of the issue. Vitro has around $1.6 billion in total debt.
The weakness in the company's performance is reflected in its financial indicators, which consider Vitro's off-balance-sheet debt (factoring programs that total $60 million), for the last 12 months ended March 31, 2003. For this period, EBITDA interest coverage, total debt to EBITDA, and FFO to total debt ratios were 2.5x, 4.2x, and 9.5%. These ratios compare unfavorably to the 2.6x, 2.9x, and 16% posted in 2000.
The company's consolidated EBITDA during the first quarter decreased 22% versus the first quarter of 2002. In particular, the company's flat glass business was hurt by the lower sales in the non-residential construction sector in the U.S. and in sales to auto OEMs. Sales of glass containers in Mexico and the U.S. were also lower because of lower demand for beer and soft drinks in the domestic and export markets. The performance of the glassware business was also weak in light of the drop of 15% in domestic sales.
Liquidity is limited. Vitro faces short-term debt maturities of $495 million (of which $279 million are revolving trade finance facilities) over the next 12 months.