Moody's cuts Teksid

Moody's Investors Service said it has downgraded TK Aluminum Ltd.'s corporate family rating to Caa1 from B2 and Teksid Aluminum Luxembourg Sarl SCA's senior unsecured rating to Caa3 from Caa1 following the continuing deterioration in the companies' operating performance and the prospect for a modest recovery over the medium term.

The outlook remains negative.

Moody's said the downgrade reflects continuing pressure on operating margins as increasing raw material costs, the time lag to pass these to final customers and prolonged inefficiencies in North America continue to erode Teksid efforts to drive costs savings and to improve the company's cash generation from core operations.

Moody's said it recognizes, however, management's efforts to restore profitability in a challenging industry environment, notably reducing operating costs, recently renegotiating key contracts with customers to allow a more timely pass through of raw material costs and alleviating immediate liquidity concern by renegotiating covenants and refinancing maturing debt.

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