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S&P downgrades Braskem-Idesa after gas row with Mexico

·1-min read

MEXICO CITY, Dec 4 (Reuters) - S&P Global Ratings on Friday lowered the credit rating of the Mexican business of Brazilian petrochemical firm Braskem after Mexico cut the natural gas supply to its operations amid a row over a contract with state oil firm Petroleos Mexicanos (Pemex).

S&P downgraded the issuer credit and issue-level ratings on the company, Braskem-Idesa, to 'B' from 'B+', two days after President Andres Manuel Lopez Obrador said Mexico's gas pipeline administrator CENAGAS had turned off its gas supply.

"The termination of the gas transport services, coupled with the ongoing negotiations of the ethane supply contract with Pemex, could be disruptive to the company's operations. This will weaken its creditworthiness," S&P said in a statement.

The recovery rating on Braskem-Idesa's secured notes of $900 million due 2029 remains at '3', S&P said. The agency placed the ratings on CreditWatch with negative implications.

Braskem-Idesa has asked authorities to "rectify" CENAGAS's decision and warned it will take legal steps to defend itself.

The business is a consortium made up 70% by Brazil's Braskem and 30% by Mexico's Grupo Idesa.

The Mexican government is trying to renegotiate a contract with the firm covering supply of ethane to make plastics at the Braskem-Idesa Etileno XXI plant near Mexico's Gulf coast.

That arrangement, which was signed by a previous Mexican government in 2010 and is in effect until 2034, obliges Pemex to supply ethane at low prices to Braskem-Idesa.

Lopez Obrador argues the contract is unfair. The company says it was won legitimately and properly approved. (Reporting by Dave Graham; Additional by Diego Ore and Bhargav Acharya; Editing by William Mallard)