Moody's rates Elyria notes B3

Moody's Investors Service said it assigned B2 corporate family and probability-of-default ratings to Elyria Foundry Co. LLC and a B3 (LGD4, 58%) rating to its $100 million senior secured notes.

The outlook is stable.

Proceeds from the notes will be used to finance Elyria's $32 million acquisition of Hodge Foundry, Inc. and to refinance some existing debt.

The agency said the B2 corporate family rating reflects the company's leveraged credit metrics, modest scale, regional focus and high customer concentrations, which could expose the company to erosion of financial metrics in a cyclical downturn.

The ratings also reflect Elyria's acquisition posture as the transaction follows approximately one year after the purchase of the company by Silverhawk Capital Partners and Moody's belief that the transaction is occurring at or near cyclical peaks in capital reinvestment by the energy industry and in conjunction with a generally weakening economic outlook, creating the potential for a downturn for demand for the company's products over the next few years.

The agency said the stable outlook reflects its expectations that the company's credit metrics will remain consistent with the rating over the near term.

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