Moody's cuts VeraSun

Moody's Investors Service said it downgraded VeraSun Energy Corp.'s corporate family and probability-of-default ratings to B3 from B2, and kept ratings under review for further downgrade.

The agency downgraded VeraSun's $210 million senior secured notes due 2012 to B1 (LGD2, 27%) from Ba3 (LGD2, 27%) and $450 million senior unsecured notes due 2017 to Caa1 (LGD5, 77%) from B3 (LGD5, 77%).

Moody's said the actions follow the company's Securities and Exchange Commission filing noting that it was forced to exit certain hedges in July due to the impact of increased margin requirements on the company's liquidity, as well as the substantial reduction in liquidity since the end of the second quarter.

The SGL-4 speculative grade liquidity rating was affirmed.

The downgrade reflects the decline in VeraSun's liquidity during the third quarter as unsuccessful hedging activities, weak cash margins and ongoing working capital and capital spending requirements have used the vast majority of available liquidity, according to the agency.

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