Moody's rates Industrias Unidas notes Caa1

Moody's Investors Service said it assigned a Caa1 debt rating to Industrias Unidas SA de CV's proposed guaranteed senior unsecured notes due 2014 and assigned a B3 senior implied rating and Caa2 senior unsecured issuer rating to the company.

The outlook is stable.

Moody's said the ratings assignment reflects the company's weak operating performance, significant competitive pressures, commodity product focus, and exposure to raw material prices, as well as its high adjusted debt levels, thin operating margins, and negative free cash flow generation.

Moreover, Moody's ratings heavily discount the cash flows of the company's unrestricted joint venture subsidiaries, recognize the high degree of customer concentration, and consider about $100 million of trade financing to be equivalent to debt.

However, Moody's said the ratings also reflect the company's relatively strong market position and low manufacturing cost base in Mexico, product diversity, and continued focus on cost reductions. The ratings also incorporate the benefits the notes derive from guarantees provided by a restricted group of subsidiaries.

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