Moody's downgrades Shiloh loan

Moody's Investors Service said it affirmed Shiloh Industries Inc.'s B1 corporate family rating, B2-PD probability of default rating, SGL-3 speculative grade liquidity rating and SGL-3 short-term liquidity rating and downgraded its $175 million senior secured revolving credit facility due 2017 to Ba3 (LGD2, 26%) from Ba2. The outlook is stable.

The rating actions follow the acquisition of Contech Castings and expansion of the company's revolver to $175 million from $120 million.

"The Contech acquisition is a good strategic fit, and Shiloh's pro-forma credit metrics are solid, but the increase in the amount of secured debt in the capital structure increases secured leverage, which in our view implies a higher expected loss for all secured debt holders," Ben Nelson, Moody's assistant vice president and lead analyst for Shiloh, said in an agency news release.

The agency said the B1 corporate family rating is principally constrained by the company's limited scale, a highly competitive environment in the automotive supplier industry, exposure to the highly cyclical automotive industry and the expectation that the company will continue to pursue debt-financed acquisitions in the intermediate term.

The rating benefits from strong market positions in key products, improved cost structure following an operational rationalization program and ongoing diversification of the company's customer base, Moody's said.

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