International credit rating agency Standard & Poor's (S&P) has announced that it has downgraded the global scale ratings of French steel tube producer Vallourec to CCC- from CCC+, while its outlook for the company is negative.
S&P stated that this downgrade reflects its view that a distressed exchange or default payment is likely in the next six months. Weak market conditions amid the coronavirus hindered Vallourec from issuing €800 million of equity earlier this year. This is putting increasing pressure on the company’s liquidity, with close to €1.7 billion of bank debt coming due in February 2021 that S&P forecasts not to be fully covered by the company’s cash position of about €1.4 billion as of June 30, 2020. S&P assesses the company’s liquidity position as weak.
The negative outlook shows that the ratings for Vallourec could be lowered to CC. If the company fails to repay its bank debt, it could be lowered to SD or D.
The ratings of the company could be raised if a restructuring is concluded to recognize any capital structure benefits garnered by the restructuring.