Moody’s cuts Magnesita, notes

Moody's Investors Service said it downgraded Magnesita Refratarios SA's corporate family ratings to B2 from B1 and the ratings of the senior unsecured notes due 2020, issued by Rearden G Holdings Eins Gmbh and guaranteed by Magnesita, to B2 from B1.

The outlook was changed to negative from stable.

Moody’s said the downgrade reflects the persistently weak fundamentals for the global steel industry and even weaker fundamentals for the Brazilian steel industry, a key market for Magnesita. Although the company's strategy foresees a lower dependency on the steel industry, the refractories segment has a large share of revenues coming from this industry (about 84% in the first nine months of 2015).

Accordingly, the agency anticipates Magnesita's leverage and interest coverage metrics to further weaken, with adjusted leverage (total debt to EBITDA) remaining above 6 times and interest coverage (EBIT to interest expense) not higher than 1 time, despite the lower level of interest expenses after the tender for the 2020 bonds in the third quarter of 2015.

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