Methanex Amends $1.1B Credit Facilities, Boosts Flexibility

Methanex Corporation MEOH boosted its financial flexibility by amending its $300 million committed revolving credit facility and $800-million non-revolving construction facility.

Notably, the amendment is expected to offer meaningful financial covenant relief and greater timeline flexibility for completing the Geismar 3 project.

The financial covenant relief will offer more flexibility in calculating minimum EBITDA to interest coverage ratio through Jun 30, 2021, and an increase of the maximum debt-to-capitalization ratio through Jun 30, 2023.

Per Methanex’s management, the amendments to its credit facilities will substantially enhance financial flexibility to allow it to navigate through this difficult time and stay in a strong financial position.

Notably, the company ended the first quarter of 2020 with cash and cash equivalents of $823 million.

Shares of Methanex have lost 55.7% in the past year compared with the industry’s 10.6% decline.

On its first-quarter earnings call, Methanex expected demand for methanol to be lower in the second quarter on a sequential comparison basis due to the impacts of the coronavirus pandemic and a low oil price environment. As a result, the company anticipates financial results to be lower in the second quarter as compared to the first quarter. Notably, it stated that it cannot accurately forecast the degree of impact at this point of time due to uncertainties regarding the duration and extent of the coronavirus pandemic, and the low oil price environment.

Further, Methanex deferred roughly $500 million in capital expenditure on its Geismar 3 project for up to 18 months due to substantial uncertainty, arising from the coronavirus pandemic.

Moreover, the company reduced maintenance capital expenditure for 2020 by $30 million. It also reduced the quarterly dividend by 90%, representing roughly $100 million in annualized cash savings.

Some better-ranked companies in the basic materials space are Agnico Eagle Mines Limited AEM, Equinox Gold Corp. EQX and Barrick Gold Corporation GOLD.

Agnico Eagle currently sports a Zacks Rank #1 (Strong Buy) and has a projected earnings growth rate of 74.2% for 2020. The company’s shares have gained 28.6% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinox Gold has a projected earnings growth rate of 65.5% for 2020. It currently has a Zacks Rank #2 (Buy). The company’s shares have rallied 52.8% in a year.

Barrick has a projected earnings growth rate of 64.7% for the current year. The company’s shares have rallied around 76% in a year. It currently has a Zacks Rank #2.

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