Moody's cuts Schuff senior debt to Caa2

Moody's Investors Service said it lowered the ratings of Schuff International Inc., including its senior implied rating to Caa2 from B3, the rating of its $90 million 10.5% senior notes due 2008 to Caa2 from B3, and its issuer rating to Caa3 from Caa1.

The outlook is negative.

Moody's said the downgrades were prompted by Schuff's sharply declining revenues, operating income and EBITDA, weakened debt protection measures, bank covenant violations, and likely asset impairment values in the event of a distress situation. The negative outlook reflects Moody's expectation that commercial construction markets will remain weak into 2004 and that backlogs will remain under pressure.

The ratings incorporate the company's substantial debt leverage, negative tangible net worth, geographic concentration in a few states, heavy dependence on fixed price contracts, reliance on a few large contracts, short duration of its backlog, and the competitive and deeply cyclical nature of the steel fabrication and erection business.

At the same time, the ratings consider the company's 26-year operating history, its ability to offer a full range of steel services and project management capabilities, and the industry trend toward design-build projects and the company's expertise in this sphere.

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