Moody's cuts Sequa to SGL-3, lifts view to positive

Moody's Investors Service said it lowered Sequa Corp.'s speculative grade liquidity rating to SGL-3 from SGL-2 and affirmed the company's corporate family and probability-of-default ratings at B1 and its senior unsecured notes at B2 (LGD4, 59%).

The outlook was changed to positive.

The change in the outlook reflects Moody's expectations that the company will continue to grow its revenue base while maintaining or modestly improving margins from current levels. The agency said that lower debt levels and improved profitability have strengthened credit metrics and liquidity is more than adequate to repay the small amount of debt maturing through 2007 despite expected modestly negative free cash flow generation.

The SGL-3 speculative grade liquidity rating reflects the agency's estimation of an adequate liquidity profile for Sequa over the forward 12-months period. With free cash flow expected to remain modestly negative through 2007, Moody's believes that it will be difficult for the company to repay the approximately $200 million of notes maturing in April 2008 entirely through internal liquidity sources and it is likely that some form of refinancing or calling on an alternative source of liquidity to meet this maturity will be necessary.

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