S&P rates Optima, notes B

Standard & Poor's said it assigned a preliminary B corporate credit rating to Optima Specialty Steel Inc., along with a preliminary B rating to Optima's proposed $200 million senior secured notes due 2017.

The preliminary recovery rating is 3, indicating 50% to 70% expected recovery in a default.

The proposed notes will be sold pursuant to Rule 144A without registration rights.

The proceeds, combined with additional sponsor equity, will be used to fund the purchase of Niagara LaSalle for $221 million and pay down existing debt of Michigan Seamless Tube, S&P said.

The outlook is stable.

The rating reflects the combination of its vulnerable business risk profile and aggressive financial risk profile, S&P said.

The ratings also consider its relatively small size compared with its competitors, its participation in the highly cyclical steel industry, a high dependence on energy and auto segments for a large portion of its earnings, the agency said, and its aggressive financial policy.

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