S&P cuts cement producer Texas Industries’ ratings

S&P cuts cement producer Texas Industries’ ratings
Published: 26 March 2010

Standard & Poor’s Ratings Services on Thursday lowered its corporate credit rating on cement producer Texas Industries Inc. deeper into junk status, citing declining demand for cement and falling prices.

S&P also noted that the company is heavily reliant on Texas and California for a majority of sales, with the latter still in the throes of a severe housing downturn. As business weakens, the company will be squeezed more by its high debt load, S&P said.

The credit ratings agency lowered the company’s rating to "B" from "B+." The rating indicates that while Texas Industries currently can cover its financial obligations, adverse business conditions will likely hurt that ability.

S&P’s rating on Texas Industries’ $550 million senior notes due 2013 was lowered to "B" from "B+" as well. The company’s recovery rating stayed at "4," which means debt holders can expect to recoup 30 percent to 50 percent of what they loaned to Texas Industries if it defaults on payment.

The ratings outlook remained at "Stable" because the company has sufficient capital to fund its operations and make debt payments over the next 12 months, S&P said. A "Stable" rating means that ratings likely won’t change in six months to two years.

But S&P warned that that if commercial construction deteriorates more than expected and spending on infrastructure remains weak, the company’s ratings could be cut.