S&P upgrades Russel Metals

Standard & Poor's said it raised Russel Metals Inc.'s long-term corporate credit rating to BB+ from BB and senior unsecured debt rating to BB from BB-. The ratings were also removed from CreditWatch, where they were placed with positive implications on March 1. The outlook is stable.

The ratings on Russel Metals reflect the company's strong market position as a leading metals distributor in Canada and its very strong financial performance in 2004 and 2005, the agency said. The company's Dec. 31 debt leverage dropped to 25% pro forma for its recent C$247 million equity issue from an elevated 56% following the acquisition of Leroux Steel Inc. in mid 2003.

S&P said these positives are tempered by volatile operating cash flow due to the inherent instability of steel prices, the company's aggressive acquisition strategy and moderate debt leverage.

The agency noted that the rating on Russel Metals' $175 million notes is one notch lower than the long-term corporate credit rating, reflecting the significant amount of priority debt, including secured bank lines and subsidiary obligations, that would rank ahead of the notes in the event of default.

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