Moody’s cuts Wise Metals, notes

Moody's Investors Service said it downgraded the corporate family rating and probability of default rating for Wise Metals Intermediate Holdings LLC to Caa2 and Caa2-PD from B3 and B3-PD, respectively.

At the same time, the agency downgraded the senior unsecured ratings of the PIK toggle notes of Wise and Wise Holdings Finance Corp. as co-issuers to Ca from Caa2. It also downgraded the senior secured rating of Wise Metals Group LLC (Wise Metals) and Wise Alloys Finance Corp. as co-issuers to Caa3 from Caa1.

The outlook is negative.

Moody’s said the downgrade reflects the weak performance of Wise to date in 2015, the continued deterioration in debt protection metrics and increase in leverage, which, as measured by the debt/EBITDA ratio is roughly 13 times for the 12 months ended Sept. 30.

In addition, the downgrade considers the fact that based upon Wise's current performance it is unable to cover its interest payments and has relied on its parent, Constellium NV (B3 corporate family rating) to provide support. Constellium has recently provided funds for interest payments on the senior secured notes at Wise Metals and advised that the PIK toggle note at Wise will go to PIK in 2016, thereby increasing the debt obligations of Wise as these notes accrete.

The downgrade factors in the potential that Constellium may not continue to provide such support.

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