Moody's changes Optima Specialty Steel outlook to negative

Moody's Investors Service said it revised Optima Specialty Steel, Inc.'s outlook to negative from stable and affirmed the B2 corporate family rating, B2-PD probability of default rating and B2 rating on Optima's $175 million senior secured notes.

The agency said the change in outlook reflects the company's recent history of acquiring small, lower-margin niche steel producers and the increase in leverage and reduced liquidity resulting from these acquisitions. Leverage was 3.5 times on a pro forma basis for the trailing 12 months ended Sept. 30.

Optima's B2 corporate family rating reflects its small size, elevated leverage, low interest coverage, moderate liquidity and exposure to volatile steel prices, Moody's said.

Optima's ratings are supported by the company's above-average margins and returns relative to other rated steel companies and its positive free cash flow, the agency said.

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