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S&P: Magnesita view negative
Standard & Poor's said it affirmed the BB long-term corporate credit rating on Magnesita Refratários SA following the company's agreement with Rhone Capital LLC to acquire its controlling stake in LWB Refractories GmbH (not rated).
The outlook was changed to negative from stable.
S&P said could improve the company's business profile but also boost financial leverage and pose integration challenges.
Magnesita was expected to post a total debt-to-EBITDA ratio lower than 3 times by the end of 2008, but considering the new debt, leverage could remain between 3.5 times to 4 times over the next few years, the agency noted.
Ratings also reflect exposure of the company's sales to cyclical industries and reliance on few customers, the agency said.
These risks are partly offset by Magnesita's leading business and market position, its privileged cost position and sound operating profile, and its broad variety of products and value-added services, S&P noted.
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