S&P revises AMG view to negative

S&P said it revised the outlook for AMG Advanced Metallurgical Group NV to negative from stable reflecting a risk of leverage staying higher for longer than S&P had expected.

“Rapid decline in vanadium prices will spike AMG’s leverage to about 9x in 2019. This is compared to our debt to EBITDA expectation of about 3x. The sharp rise and rapid fall of vanadium prices led to a $76 million inventory write-down at AMG’s spent catalyst recycling operations, which will reduce our adjusted EBITDA to about $50 million from our expectation of approximately $150 million,” said S&P in a press release.

S&P is concerned leverage could remain above 4x longer than it had expected. “This could arise if the efforts to limit vanadium price exposure and inventory write-downs in its spent catalyst operations do not work as anticipated or if further price movements across the portfolio further deteriorate metrics,” the agency said.

S&P affirmed its BB- rating on AMG and BB rating on the company’s revolver and term loan. Both have a 2 recovery rating. In addition, S&P affirmed B rating on AMG’s unsecured tax-exempt bonds with a 6 recovery rating.

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