Moody's: VeraSun outlook negative

Moody's Investors Service said it moved the outlook for VeraSun Energy Corp. (B2 corporate family rating) to negative and downgraded the speculative-grade liquidity rating to SGL-4 from SGL-3.

The change in the outlook reflects the ethanol industry's unattractive commodity margins and a decline in VeraSun's liquidity, the agency said, adding that the company's B2 corporate family rating and ratings on VeraSun's two public debt issues were affirmed.

Affected notes include VeraSun's probability of default rating at B2, $210 million senior secured notes due 2012 at Ba3 (LGD2, 27%) from Ba3 (LGD2, 23%) and $450 million senior unsecured notes due 2017 at B3 (LGD5, 77%) from B3 (LGD5, 72%).

The current ethanol industry environment is unattractive due to high corn and natural gas commodity input costs and unattractive ethanol pricing that has led to slim operating margins and elevated working capital requirements, the agency added.

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