S&P cuts Zlomrex bonds to B-

Standard & Poor's said it lowered the long-term corporate credit rating on Zlomrex SA to B from B+ after reviewing the company's liquidity, growth strategy and financial policy. S&P affirmed the B short-term credit rating. The ratings were removed from CreditWatch with negative implications, where they were placed on Aug. 15.

The senior secured debt rating on the €170 million 8½% callable bonds due 2014 issued by subsidiary Zlomrex International Finance SA was lowered to B- from B.

The outlook is negative.

The downgrade reflects Zlomrex's constrained liquidity and refinancing risks given high short-term debt, limited cash resources and available credit lines, cash payments for acquisitions during the second half of 2007 and negative free operating cash flow, according to the agency.

The ratings reflect its acquisitive growth strategy, small size compared with peers and volatile margins in a cyclical and competitive steel sector, S&P said. The ratings are further constrained by the group's limited liquidity, volatile cash flows and rising leverage, the agency said.

Supporting the ratings, S&P said, are Zlomrex's integrated steel operations, including scrap steel, production and distribution.

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