Moody's lifts SGL Carbon, rates convertibles Ba3

Moody's Investors Service said it upgraded SGL Carbon AG's corporate family rating to Ba2 from Ba3 and assigned a provisional Ba3 rating to the company's proposed €210 million senior unsecured convertible notes.

The outlook is stable.

The upgrade follows an improvement in the company's performance and the substantial repayment of its remaining European Union fines. The upgrade also reflects the agency's expectations that the refinancing exercise announced by the group will not lead to any notable increase in absolute debt level and that operating cash flow generation will strengthen, aided by good revenues visibility and a robust performance outlook for 2007.

Moody's noted, however, that SGL Carbon faces a substantial expansion in Malaysia in the next several years, which the agency assumes will be financed out of the operating cash flow and will, therefore, depress expected free cash flow-to-debt metrics in the next 12 to 18 months.

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