Vallourec Bonds Decline After Rating Cut to One Level Above Junk

Vallourec SA’s bonds fell to the lowest in almost two months after Standard & Poor’s cut the credit rating for the French producer of steel pipes for the oil and gas industry to one level above junk.

Vallourec’s 500 million euros ($560 million) of 2.25 percent bonds dropped 3.8 cents on the euro to 96.5 cents, according to data compiled by Bloomberg. S&P downgraded Vallourec one step to BBB- with a negative outlook on Wednesday, citing “depressed demand” for its products.

A slump in oil prices contributed to 76 million euros of losses in the first quarter and plans to cut 2,000 jobs, almost 10 percent of its workforce, the company said in a statement late Wednesday. Crude has fallen more than 40 percent since June, according to data compiled by Bloomberg.

“Vallourec is currently facing very difficult market conditions, characterized by major exploration and production capex cuts by our customers,” Chairman Philippe Crouzet said in the statement.

The yield premium over benchmark government debt widened 43 basis points to 239 basis points, the data show. The notes were the worst performers in Bank of America Merrill Lynch’s euro non-financial index.

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