Moody's rates Wise Metals notes

Moody's Investors Service said it assigned first-time ratings to Wise Metals Group LLC, the third-largest producer of aluminum beverage can stock in North America. The following ratings were assigned: B2 for the proposed $150 million senior secured notes due 2012 jointly issued by Wise and Wise Alloys Finance Corp., B2 senior implied rating, Caa1 senior unsecured issuer rating, and SGL-3 speculative grade liquidity rating.

The outlook is stable.

Proceeds from the proposed note offering and about $23 million of bank revolver borrowings will be used to repay all existing debt and redeem small amounts of preferred and common shares from inactive members.

Moody's said the ratings reflect Wise's dependence on a single asset, dependence on sales chiefly to two customers, and lack of pricing power in a mature market dominated by two much larger, financially stronger, and fully integrated competitors, Alcan and Alcoa.

Wise may not have the financial resources required to adapt to significant technological or aluminum can design changes. Market share concentration and intense competition among packaging companies and their customers, the beverage companies, as well as competition from other packaging materials such as plastics and glass, have limited the operating margins earned by producers of can stock and this is expected to continue.

Moody's said the ratings are supported by the technological capabilities of Wise's Listerhill facility, its fairly stable conversion costs, and the modest but encouraging progress it has made in expanding its can stock customer base.

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