Moody's rates ASPropulsion notes B2

Moody's Investors Service assigned a provisional B2 rating to the proposed issue by ASPropulsion Capital BV of €200 million senior notes due 2013 and a provisional Ba3 senior implied rating to Avio Holding SpA. The outlook is stable.

The proposed issue, along with €749.4 million of drawings under Avio SpA's senior secured credit facilities, will primarily be used to refinance existing indebtedness assumed by Avio in connection with the contribution of the Avio business by the Fiat group to Avio.

Avio's ratings reflect the company's leading position as a global supplier in the aeroengine market; the high market barriers to entry that exist in the aeronautical industry; Avio's long-term relationships with leading aircraft engine manufacturers and national governments and its experienced management team; the political and strategic importance of Avio to the Italian government; the stable and predictable nature of the majority of the company's earnings and cash flow; its diverse engine portfolio; its conservative hedging policy; and Moody's expectation that Avio should maintain adequate liquidity given available cash balances, undrawn bank commitments and limited mandatory debt amortization before 2005.

However, the rating also reflects: Avio's significant exposure to the commercial airline sector; the company's high financial leverage; strong competition in both Avio's direct and end customer markets; Avio's increasing participation in risk/revenue sharing programs which exposes the company to downside risk including cost overruns as well as negatively impacting working capital; and the prevalence of large revenue programs which, whilst customary for this industry, result in high customer concentration and large fluctuations in working capital, and can be subject to material delays or cancellations due to both technical and financial reasons which could negatively impact Avio's operating performance.

The stable outlook reflects Moody's opinion that despite the prevailing weak market conditions in the civil aerospace industry, Avio's near-term earnings will be supported by its more predictable military division and that consequently Avio will remain free cash flow generative and will use its free cash flow to reduce indebtedness and will not make acquisitions that will materially impact leverage or free cash flow generation.

With total debt/EBITDA of 4.6x and EBITDA/cash interest expense of 3.2x, the company is viewed as highly leveraged, Moody's added.

S&P rates IMCO notes B-

Standard & Poor's assigned a B- rating to IMCO Recycling Inc.'s planned $200 million senior secured notes due 2010. The outlook is stable.

S&P said the ratings on IMCO Recycling reflect its weak business position, an acquisitive financial policy and very weak financial profile.

Its business position is characterized by its exposure to cyclical industries and volatile aluminum and zinc prices as well as thin margins and currently high input costs. Partially mitigating these factors is the company's fair market share in aluminum recycling and zinc products and its high percentage of long term tolling arrangements with price escalators, which reduces commodity price, earnings, and cash flow volatility.

The company's acquisitive growth strategy heightens credit concerns, S&P said. Growth will primarily be focused on international expansion and increasing service to automobile manufacturers and their suppliers, as well as on forward and backward integration. IMCO's thin operating margin (before depreciation and amortization) which has averaged 5.7% over the past three years and weak free cash flow generation, make it particularly susceptible to fluctuating volume and raw material costs such as scrap aluminum and zinc and natural gas. Indeed, the need to ease financial covenants under the credit facility on April 28, 2003, highlights the inherent risks associated with IMCO's business model during market downturns.

Pro forma leverage is aggressive with debt to capital at 65% and debt to last 12 month EBITDA at 4.2x (including capitalized operating leases) on June 30, 2003. S&P said it expects the company's debt to remain near current levels through 2004, as free cash flow is expected to remain weak in light of soft conditions in the aluminum and zinc markets and low capacity utilization levels and an acquisitive growth strategy. Pro forma for the refinancing, S&P estimates last 12 month funds from operations to debt at 16% and last 12 month EBITDA to interest at slightly under 2.5x on June 30, 2003.

Moody's rates Metropolitan bank bonds Ba1

Moody's Investors Service assigned a prospective Ba1 rating to Metropolitan Bank & Trust Co.'s proposed $100 million subordinated 10-year debt. The outlook is stable.

Moody's said the rating reflects the proposed issue's subordination to senior bank obligations. It also recognizes the bank's moderate capability to service its debt obligation, given its financial profile that is characteristic of banks with D bank financial strength ratings.

Despite the subordinated status of the proposed notes, the issue was rated above MBT's deposits, which are constrained by the Philippines' foreign currency deposit ceiling.

Moody's said it believes that the risk associated with the subordinated status is mitigated by the low likelihood that the bank would face regulatory intervention that could potentially prompt credit losses for noteholders. Moody's believes that MBT, as the Philippines' largest bank, would receive strong regulatory support if needed.

© 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.