Downgrade for builders as concern over debts grows
Hochtief, Germany's largest construction company, and other European builders were downgraded by Merrill Lynch on concern debt-financed acquisitions will add extra strain to their finances as economies deteriorate.
Merrill cut its recommendation on Hochtief, Bilfinger Berger and Ferrovial of Spain to "neutral" from "buy", according to analyst Luis Prieto. Merrill lowered Eiffage and Fomento de Construcciones y Contratas to "underperform'' from "neutral" and kept "buy" ratings on ACS and Vinci.
"The fact that contractors have not been stress-tested by previous economic downturns in their current configuration makes us adopt a very conservative approach," Mr Prieto said in a note.
"Negative sentiment" surrounds European builders' shares," added Mr Prieto.
Attempts to diversify have exposed European contractors to additional risk. (© Bloomberg)
- Tom Biesheuvel
