) senior unsecured debt has been upgraded by Moody's Investors
Service - the rating unit of
) - to Baa3 from Baa1. The upgrade mainly reflects the strong
profit margin, credit metrics and favorable industry conditions
that supports the Baa3 investment grade rating. The upgrade
underscores the company's strong profit margin and credit metrics
as well as favorable industry fundamentals.
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METHANEX CORP (MEOH): Free Stock Analysis
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Methanex's improved methanol production asset profile, thanks to
capacity expansion and higher production based on low cost
natural gas feedstocks, also supported the upgrade.
Methanex's $150 million senior unsecured notes due 2015 were
lifted from Ba1 to Baa3. The rating on $250 million senior
unsecured notes due 2022 was also raised from Ba1 to Baa3.
Moody's also upgraded the $300 million senior unsecured notes due
2019 from Ba1 to Baa3. For every note, LGD4 (Loss Given Default)
is 58%. These upgrades were aided by Methanex's geographic
diversity and strong cash balance.
Moody's provided Methanex a stable ratings outlook. The rating
agency expects Methanex to continue generating strong financial
metrics over the next two to three years, despite heavy capital
spending on new capacity.
Methanex's conservative financial philosophy and modest debt also
aided the rating. Moody's also raised other ratings for the
company based on benefits from selling high volumes of methanol
logistics assets. However, the rating agency has withdrawn the
Corporate Family Rating of Ba1 and Probability of Default Rating
However, the rating agency is apprehensive of inconsistent
supplies of natural gas feedstock, exposure to changes in foreign
government policies and high operating leases. Moody's also
remains cautious about Methanex's single portfolio, and the
cyclical nature of pricing and demand in the methanol market.
Moody's also stated that the ratings could be downgraded if
Methanex does not maintain adequate liquidity, debt to EBITDA of
less than 2.8x and retained cash flow to debt of at least 20%.
The company will also face a rating downgrade if it fails to
generate positive free cash flow after the Geismar I plant
start-up in 2015.
Methanex is the world's largest supplier of methanol. The company
believes that its healthy financial position, strong global
supply network and competitive-cost structure will strengthen its
leadership position in the global methanol industry and help it
to continue delivering incremental returns to shareholders.
However, the company may continue to face gas supply restrictions
in the near term. Methanex's production has been crippled by a
shortage of natural gas supplies in various regions. It expects
short-term natural gas curtailment issues across a number of
Methanex carries a short-term Zacks Rank #2 (Buy). Other chemical
companies with a favorable Zacks rank include
L'Air Liquide SA
Air Products & Chemicals Inc.
). Both hold a Zacks Rank #2 (Buy).