Research Update: Elementia Downgraded To 'BB-' On Higher Leverage And Growing Risk From COVID-19; Ratings Still On Watch Negative

We anticipate that a global recession from the coronavirus pandemic will undermine Mexican building materials company Elementia's revenue and cash generation in most of its operations--across its three business units in Mexico, the U.S., and Central and South America. As a result, we no longer forecast a consistent deleveraging trend with adjusted debt to EBITDA consistently below 4.0x in 2020. On April 15, 2020, S&P Global Ratings lowered its issuer credit rating on Elementia to 'BB-' from 'BB'. At the same time, we downgraded its $425 million senior unsecured notes to 'BB-' from 'BB', and affirmed the recovery rating at '3'. We're keeping all of the ratings on Elementia on CreditWatch with negative implications, reflecting a potential further downgrade that

...- We anticipate that a global recession from the coronavirus pandemic will undermine Mexican building materials company Elementia's revenue and cash generation in most of its operations--across its three business units in Mexico, the U.S., and Central and South America. - As a result, we no longer forecast a consistent deleveraging trend with adjusted debt to EBITDA consistently below 4.0x in 2020. - On April 15, 2020, S&P Global Ratings lowered its issuer credit rating on Elementia to '##-' from '##'. At the same time, we downgraded its $425 million senior unsecured notes to '##-' from '##', and affirmed the recovery rating at '3'. - We're keeping all of the ratings on Elementia on CreditWatch with negative implications, reflecting a potential further downgrade that will depend on the depth of the economic recession and duration of COVID-19's effects on Elementia's operating and financial performance. Measures to preserve liquidity will be vital. We will also monitor potential effects...

Research Update