Standard & Poor's Ratings Services lowered its ratings on Panama Canal Railway Co. (PCRC), including lowering the long-term corporate credit rating to 'B+' from 'BB'. The outlook is stable, S&P said.
The railroad that runs alongside the Panama Canal is strategically located with definite advantages, including favorable concession terms that limit potential new competition and enable PCRC to establish rate structure, an adequate liquidity position, and a security package consisting of the rights and obligations under the concession title, fixed assets, and a security interest in the shares of PCRC.
But lower than expected volume during the recession and a heavy reliance on debt to finance expansion offset those strengths.
"The downgrade reflects a significant deterioration in PCRC's financial results, as seen in first- and second-quarter 2009. Higher-than-expected decreases in volumes due to the current economic environment and the consequent fall in international trade have impaired PCRC's main credit metrics. We believe a recovery will be slow and that it could take two to three years for the company to report financial metrics similar to those of year-end 2008," said Standard & Poor's credit analyst Enrique Gomez-Tagle.
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