S&P cuts Metallurg to D

Standard & Poor's said it lowered its corporate credit rating on Metallurg Inc. and its parent Metallurg Holdings Inc. to D from CCC-. S&P also lowered the ratings on Metallurg's 11% senior notes due 2007 and Metallurg Holdings' 12.75% senior discount notes due 2008 to D from CC.

S&P said the downgrade follows the company's announcement that it did not make the $5.5 million interest payment due June 1 on the 11% senior notes due 2007. S&P believes it is unlikely payment will be remedied within the 30-day grace period under the bond indenture and that the default will be general, as Metallurg is restricted from upstreaming funds to Metallurg Holdings to meet its July 15 interest payment to public holders of its 12.75% senior discount notes due 2008.

Metallurg produces specialty metals, alloys and metallic chemicals used by manufacturers of steel, aluminum, and superalloys. Weak demand in the past couple of years from the global steel and aluminum industries, as well as significantly reduced demand from major customers in the aerospace sector has led to lower margins. Reduced margins, combined with an overleveraged capital structure, have put the company in a distressed position, the agency said.

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