TEXT-S&P cuts Schmolz + Bickenbach to 'B';outlook stable

Wed Sep 19, 2012 6:29am EDT

(The following statement was released by the rating agency)

Sept 19 -

Overview

-- Schmolz + Bickenbach's EBITDA significantly underperformed our expectations in the second quarter of 2012.

-- On the back of deteriorating economic conditions in Europe, we have lowered our forecasts for Schmolz + Bickenbach's 2012-2013 EBITDA and therefore expect the company to post higher leverage ratios than we had previously anticipated.

-- We are lowering our long-term rating on Schmolz + Bickenbach to 'B' from 'B+'.

-- The stable outlook reflects our view that Schmolz + Bickenbach will contain its leverage as measured by Standard & Poor's adjusted debt to EBITDA at 6.0x despite difficult market conditions, and our expectation that its core banks will allow the company to reset its covenants if needed.

Rating Action

On Sept. 19, 2012, Standard & Poor's Ratings Services lowered to 'B' from 'B+' its long-term corporate credit rating on Switzerland-headquartered specialty long steel producer Schmolz + Bickenbach AG. The outlook is stable.

We also lowered the issue rating on the company's EUR258 million senior secured bond to 'B' from 'B+'. The recovery rating on this instrument is unchanged at '3', indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default.