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S&P cuts Metallurg
Standard & Poor's downgraded Metallurg Inc. including lowering its $100 million 11% senior notes due 2007 to CCC from CCC+ and Metallurg Holdings Inc.'s $65 million 12.75% senior discount notes due 2008 to CCC- from CCC. The outlook is negative.
S&P said the downgrade action reflects Metallurg's continued weak financial performance as well as liquidity and covenant concerns.
It is doubtful that Metallurg will be in compliance with a $10 million minimum liquidity covenant under the revolving credit facility indenture, which if enforced, will restrict it from making its Dec. 1 $5.5 million interest payment on the 11% senior notes and also restrict the upstream of funds to Metallurg Holdings in order to service the Jan. 15, 2004 $7.7 million interest payment on its $121 million outstanding 12.75% senior discount notes.
The ratings reflect Metallurg's below-average business position as a global producer and marketer of metal alloys used by manufacturers of steel, aluminum, and superalloys; its aggressive financial policy; poor financial performance; and declining liquidity. The ratings also reflect concerns about the ability of Metallurg to service its interest payments and the interest payments at its parent, S&P said.
Metallurg's weak financial profile is attributable to poor conditions in the global steel and aluminum industries as well as significantly reduced demand from major customers in the aerospace sector, S&P noted.
At June 30, 2003, Metallurg had negative equity, total debt of $133.5 million, and pension and environmental liabilities totaling $79 million. EBITDA to interest coverage was a weak 0.6x for the 12 months ending March 31, 2003, S&P said.
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