OHL bonds fall further after Moody's downgrade
By Robert Smith
LONDON, Aug 3 (IFR) - Obrascon Huarte Lain's bonds fell for the third day in a row after Moody's hit the Spanish construction firm with a one-notch rating downgrade on Wednesday.
OHL's bonds came under pressure on Monday after reporting poor first-half results, before taking another leg down on Tuesday as a planned share buyback spooked debt investors.
Moody's cut the company's credit rating one notch to B3, while switching from a stable to negative outlook, citing material negative free cash flow and rising recourse debt levels.
OHL's 230m 7.625% 2020 bond fell five points to a cash price bid of 73 on Wednesday, according to Tradeweb, equating to a yield of nearly 19%. Its 400m 4.75% 2022 bonds meanwhile were bid at just 60.50, having fallen more than two points over the course of the day.
The company's share price has been hammered even harder - despite the announcement of the up-to 45m share buy back - with the stock down 24% intraday at 4.45pm.
The downgrade is the second from Moody's this year, having cut the rating one notch to B2 with a stable outlook in March. This last downgrade triggered a margin step-up on OHL's 250m syndicated loan.
"They're adjusting their business strategy to focus on lower margin projects, which is forcing them to cut their debt," Matthias Hellstern, a managing director at Moody's, told IFR.
"But despite pulling all the levers they have, leverage has gone up not down." Continuación...