Moody's rates New Reclamation notes B1

Moody's Investors Service said it assigned a provisional Ba3 corporate family rating to South Africa-based The New Reclamation Group (Proprietary) Ltd. and a provisional B1 rating to the proposed €245 million issuance of senior secured notes due 2013.

The outlook is stable.

Moody's said New Reclamation's ratings reflect the cyclical nature of the heavy metals industry, forecast weakness in global steel prices, the company's relatively high levels of fixed costs, exposure to customer concentrations, high levels of indebtedness, capital expenditure in line with historical trends of between 2.5% and 3% of sales and regulatory uncertainty.

The ratings are supported by New Reclamation's significant market share in the South African ferrous and non-ferrous markets, the company's long-term relationships, although mostly not contractual, with key suppliers and customers and a management strategy to manage gross profit margins by attempting to pass on price changes to suppliers, the agency said.

The company has a highly leveraged capital structure with a pro-forma adjusted total debt to EBITDAR of 4.6x for the last 12 months ended October 2005.

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