S&P cuts Reichhold to negative

Standard & Poor's said that it revised the outlook on Reichhold Industries Inc. to negative from stable and affirmed the B- corporate credit rating and CCC+ issue-level rating on the company's $195 million of notes due Aug. 15, 2014. The recovery rating is unchanged at 5, which indicates the expectation for modest (10% to 30%) recovery.

The negative outlook reflects the potential for ratings to move lower if the financial profile deteriorates further due to weak operating results or cash flow pressures caused by substantial capital outlays or adverse working capital trends, the agency said.

The continuation of weak operating results, resulting from elevated raw material costs and limited pricing power, would limit profitability in the near term, the agency added.

The ratings on Reichhold reflect the company's highly leveraged financial profile and a weak business risk profile characterized by low operating margins and cyclical, competitive markets, the agency said.

Reichhold's market positions in its resins product lines, significant geographic diversity of sales and management's commitment to maintain adequate liquidity and to reduce debt-like obligations partially mitigate weaknesses, the agency added.

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