S&P puts Gruma on watch

Standard & Poor's said it placed Gruma SAB de CV's BBB- long-term corporate credit rating and BBB- $300 million perpetual bonds on CreditWatch with negative implications.

The agency said the CreditWatch placement reflects its belief that the company's 2007 year-end results will not meet S&P's expectations of an interest coverage ratio of about 6 times and a total debt-to-EBITDA ratio close to 2 times. For the 12 months ended Sept. 30, these ratios were 5 times and 2.9 times, respectively.

During the fourth quarter, corn and wheat prices continued to increase. Although Gruma made some price adjustments at the end of 2007 to offset the increases in its costs, S&P said it is concerned about the company's ability to continue passing through cost increases to its clients and reducing its debt levels.

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