Moody's Ratings downgrades Alpek's rating to Ba1

Moody's Ratings downgrades Alpek's rating to Ba1

Moody’s Affirms Alpek’s Baa3 Rating but Adopts Negative Outlook Amid Rising Leverage Concerns

Moody’s Ratings has affirmed Alpek, S.A.B. de C.V.’s Baa3 senior unsecured notes rating but from stable, citing deteriorating financial metrics and a sluggish recovery in the company’s core polyester business. The rating agency highlighted that Alpek’s adjusted debt/EBITDA ratio surged to 5.9x as of March 31, 2025, up from 3.6x in December 2023, exceeding the Baa3 rating threshold of 3x. This trend is projected to persist, with leverage expected to remain above 4.9x through 2025 and 4.2x by 2026.

Alpek’s adjusted EBITDA for the twelve months ending March 31, 2025, totaled $405 million, roughly half of its mid-cycle average of $800 million and a third of its 2021/2022 peak. While capacity rationalization in the PET segment may improve margins, Moody’s anticipates earnings will remain below mid-cycle levels for the near term, limiting debt reduction. The agency also noted that Alpek’s free cash flow is expected to reach $31 million in 2025, constrained by $36 million in dividend payments and $165 million in capital expenditures.

Despite robust liquidity—$344 million in cash and equivalents plus $600 million in committed facilities— Moody’s expressed concerns about the company’s ability to meet its $503 million debt repayment in 2027 without significant operational improvements. A return to a stable outlook would require adjusted debt/EBITDA to approach 3x, interest coverage to reach 6x, and sustained positive free cash flow generation.

The Baa3 rating reflects Alpek’s strong market position in the polyester industry but underscores heightened risks from elevated leverage and volatile earnings. Investors are advised to monitor the company’s progress in reducing debt and restoring profitability.

(https://www.investing.com/news/stock-market-news/moodys-changes-alpeks-outlook-to-negative-affirms-baa3-rating-93CH-4134529): Investing.com, April 2025