CHICAGO & MONTERREY, Mexico - (Business Wire) Fitch Ratings has downgraded the foreign and local currency IDRs of Corporacion Durango S.A. de C.V. (Durango) to 'D' from 'CC' and has affirmed its 'CC/RR4' rating of the company's notes due in 2017. All ratings have been removed from Rating Watch Negative.
Fitch's action follows today's announcement by the company that it will not make a coupon payment on its 2017 notes, and that it has initiated a debt restructuring in Mexico through a Concurso Mercantil process.
As of June 30, 2008, Durango had US$533 million of debt and US$35 million of cash and marketable securities. Short-term debt totaled US$12 million and the company was scheduled to make a US$26.5 million coupon payment on October 5.
Durango's debt consists primarily of the US$509 million notes due in 2017.
During the latest 12 months (LTM) ended June 30, 2008, Durango generated US$65 million of EBITDA, a decline from US$126 million of EBITDA during the LTM ended June 30, 2007. The decline in the company's operating profitability is due to continued high prices for old corrugated containers (OCC), a key raw material, and rising energy costs. The increase in these two costs, plus other factors, have led to a rise in the Durango's unit cost per ton to US$619 for the quarter ended June 30, 2008, from US$502 during the same quarter in 2007. Price increases have not offset these cost increases, as Durango's prices have risen on average by only US$61 per ton during this time period.
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Fitch Ratings
Joe Bormann, CFA, +1-312-368-3349 (Chicago)
Albert Moreno, +52 818 335-7239 (Monterrey)
Media Relations:
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