Moody's rates SGL Carbon facility, notes

Moody's Investors Service said it assigned a prospective B2 senior implied rating to SGL Carbon AG and a prospective Caa2 unsecured issuer rating.

Moody's also assigned a prospective B2 rating to a proposed €227 million in amended senior secured credit facilities due 2008 at SGL Carbon AG and certain of its subsidiaries and to a proposed $116 million in senior secured credit facilities due 2009 at SGL Carbon LLC. Moody's also assigned a prospective Caa1 rating to the proposed €270 million in senior notes due 2012 at SGL Carbon Luxembourg SA.

The outlook is stable.

Moody's said the ratings reflect the company's exposure to the cyclical steel and aluminum industries; the mature nature of SGL Carbon's main markets and the threat that competition from lower cost countries will increase in the longer term; and its exposure to changes in production costs (particularly due to changing energy costs and increasingly tight environmental legislation).

The ratings also reflect the company's exposure to changes in exchange rates, particularly the U.S. dollar; the negative impact on profitability and cash flow of the company's SGL Technologies division combined with continuing restructuring costs; and weak credit metrics with pro forma adjusted total debt to EBITDAR for the 12 months ended September 2003 of c. 6.8x (6.3x on a net basis).

More positively, the ratings also reflect the company's leading international market positions in carbon and graphite products; Moody's view that liquidity will be satisfactory following the recapitalization; Moody's expectation that market conditions should improve for all of the company's divisions in 2004, but particularly its core carbon and graphite division; and the expectation that following certain one-off costs in 2004, the company will generate positive free cash flow.

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