Rhodia, a French-based manufacturer of specialty chemicals, has started a renegotiating process with all of its major banks to review covenants, explained Fabrizio Olivares, Rhodia's investor relations official. Rhodia has EUR1.8 billion in credit lines with one EUR600 million syndicated line and EUR1.2 billion of bilateral lines. Société Générale, Credit Lyonnais and BNP Paribas are among the banks involved in Rhodia's credit lines, said Olivares. Under these bank lines there are two covenants that the company must maintain--an EBITDA-to-financial changes multiple and a net debt-to-EBITDA ratio. Under the current circumstances, these two covenants would be breached at the end of the year, he explained.
The company has recently announced that the depressed economic environment will negatively impact third quarter results. In response to the expectation, the company is now pursuing a plan to tweak its business portfolio, financial structure and cost reduction initiatives. Due to these recent revelations, Standard & Poor's has lowered the company's long-term corporate credit rating on the company from BB+ to BB- and Moody's Investors Service has placed the credit on review for a possible downgrade.