Fitch Downgrades Methanex's IDR to 'BBB-'; Outlook Stable

CHICAGO--(Business Wire)--
Fitch Ratings has downgraded Methanex Corporation's (MEOH) Issuer Default Rating
(IDR) and senior unsecured ratings as follows:

--IDR to 'BBB-' from 'BBB';

--Senior unsecured debt to 'BBB-'from 'BBB';

--Senior unsecured revolver to 'BBB-' from 'BBB'.

The Outlook is Stable.

Methanex's ratings are supported by its size, scale, and low-cost position
within the methanol industry; global distribution network; light maturity
schedule; and conservative financial management. Ratings concerns center on the
company's single product focus; the sizable volume losses experienced at its
Chilean plants due to ongoing gas supply disruptions; the potential for higher
capex spending linked to accelerated natural gas development in Chile and the
construction of Methanex's 1.3 million tonnes per annum (mmtpa) Egyptian
methanol plant; and recent sharp declines in global methanol pricing.

Methanex's Chilean plants comprise over half of its total nameplate production
capacity. In the first quarter, utilization at these plants averaged just 24%
due to the ongoing disruption of natural gas imports from neighboring Argentina.
Methanex has supplemented lost volumes with higher levels of purchased and
commissioned methanol sales, but margins on these sales are significantly lower
than on Methanex's own production. In the current global economic contraction,
Methanol pricing has fallen dramatically from the record highs seen in 2008. As
of July, posted methanol prices averaged just $214/tonne for the year, versus
$606.4/tonne over the same period last year, a 64% decrease. Fitch notes that
while demand for methanol in energy applications (30% of demand) has held up
well, traditional applications (70% of demand) including formaldehyde, acetic
acid, and other chemical derivatives used across a wide range of consumer
products, have been significantly affected by the downturn.

Methanex' liquidity is solid. As previously stated, its maturity schedule is
light, with only project finance amortizations due in the near term (2009: $14.7
million; 2010: $20.6 million; 2011: $27.1 million) and the next major maturity
due is the company's $200 million 8.75% notes in 2012. At March 31, 2009, the
company's $250 million unsecured revolver (due June 2010) was undrawn and cash
stood at $313 million, providing total liquidity of $563 million. Financial
covenants contained in the company's debt structure include a
debt-to-capitalization ratio and minimum interest coverage ratio (revolver). The
company also has a limitation on secured debt (contained in the revolver and
notes outstanding).

Fitch would also note that Methanex's contracts with gas suppliers offer a
measure of downside protection for creditors - contracts at several of the
company's methanol plants allow Methanex to pay low base natural gas prices but
share the upside with natural gas suppliers when methanol prices rise above
certain levels. From a creditor perspective, this helps the company by lowering
its cost structure under depressed methanol pricing conditions. Supply contracts
with this structure include Chile, Trinidad, Egypt, and to a lesser extent, New
Zealand.

Credit statistics for Methanex have weakened over the last 12 months (LTM) due
to a combination of higher debt levels and the slump in methanol demand and
pricing. Note that because Methanex has a controlling interest in the Egypt
project, it consolidates 100% of the underlying project debt onto its balance
sheet despite holding just a 60% interest in the facility.

As calculated by Fitch, Methanex's debt/EBITDA increased from 0.92x in 2007 to
3.28x at March 31, 2009 (2.71 times [x] adjusting for Egypt debt). Total debt
over the same timeframe increased to $832.4 million ($686 million adjusting for
Egypt debt), up from $514.9 million at the beginning of 2007. For the LTM ending
March 31, 2009, Fitch-calculated EBITDA/gross interest was 4.3x and funds from
operations interest coverage was 4.0x, versus 10.5x and 6.3x seen a year
earlier.

Methanex's free cash flow was -$259 million versus $32.8 million a year earlier.
Adjusting for partner equity contributions on the Egypt project, free cash flow
would have been approximately negative $189 million. Fitch anticipates that
credit metrics will weaken further as more Egypt related debt is placed on the
balance sheet and a soft methanol pricing environment persists. Fitch forecasts
that the company will remain free cash flow negative for 2009 and 2010.

At year-end 2008, Methanex's pensions had a funding deficit of $18.2 million
versus $22.7 million the year prior. The company's asset retirement obligation
was $12 million and was primarily linked to expected site remediation.

Methanex is the world's largest supplier of methanol, with production facilities
located in Chile, Trinidad, and New Zealand, as well as a 1.3 mmtpa plant
currently under construction in Egypt and expected online in the second quarter
of 2010. Total production capacity is 7.2 million tonnes. Sales for 2008 of 6.1
million tonnes constituted approximately 15% of estimated global methanol
demand. In addition to produced methanol, the company purchases and distributes
methanol from project partners and on the spot market. Methanex maintains a
global storage and distribution network, including a fleet of 18 ocean-going
vessels.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Mark C. Sadeghian, CFA, +1-312-368-2090 (Chicago)
Sean T. Sexton, CFA, +1-312-368-3130 (Chicago)
Cindy Stoller, +1-212-908-0526 (Media Relations, New York)
cindy.stoller@fitchratings.com

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