Moody's cuts International Wire

Moody's Investors Service downgraded International Wire including cutting its $150 million 11.75% senior subordinated notes due 2005, series B $150 million 11.75% senior subordinated notes due 2005 and $4.2 million 14% senior subordinated notes due 2005 to Ca from Caa1. The outlook is stable.

Moody's said the action reflects the difficult business environment, weak cash flow generation and high leverage and the challenging outlook for the majority of the company's product segments.

Moody's added that its rating reflects the concern that International Wire's rate of improvement may not be sufficient to allow for it to fully refinance its 2005 debt maturities.

The company's expense reduction strategies have not been sufficient to offset revenue pressure, Moody's said. The company's products, (bare wire and insulated wire), have suffered from lower sales as evidenced by the 8% decline in sales for the first half versus the same period a year earlier. Furthermore, the company's product and customer mix suggests that a recovery will likely be slow in nature.

These factors will likely make it challenging for the company to refinance its $82 million 10 3/8% senior secured notes when they become due on Feb. 28, 2005 and its $300 million in senior subordinated notes that mature in June 2005.

The ratings also consider the potential for stronger demand for the company's products with an economic recovery and actions taken by the company to reduce costs. Automotive wire represents over 40% of the company's sales and should benefit from growth in auto unit sales when the economy strengthens. The industrial/energy segment represents around 20% of total sales and is also positioned to benefit as the economy improves. The electronics/data segment, however, is more difficult to estimate as the telecom/technology business has been slow to recover.

For the 12 months ended June 30, 2003, total debt to EBITDA was high at approximately 8.9x, Moody's said. EBITDA coverage of interest for the same period was 1.2x and EBITDA less capital expenditures coverage of interest was only 0.9x. Property, plant and equipment at June 30, 2003 was only $120.1 million. This compares with senior debt of $86.1 million, and total debt of $405.8 million. Thus, Moody's believes that coverage would not be sufficient in a distress scenario.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.