Fitch revises Eramet outlook to negative

Fitch Ratings said it revised its outlook for Eramet SA to negative from stable and affirmed its BB+ ratings on the company and its senior unsecured notes. The recovery rating on the notes is RR4.

“The negative outlook reflects weaker-than-expected operational performance across the group, including the uncertain future of the loss-making operations of Societe le Nickel (SLN), Eramet's subsidiary in New Caledonia, amid uncompetitive electricity supply in a weaker price environment for ferronickel. Combined with large projects, subject to execution risks, EBITDA net leverage trends above 1.5x in our updated forecasts, assuming SLN remains a consolidated entity.

“While Eramet publicly stated that they will not commit new funding for SLN, the political importance of this asset for New Caledonia's economy casts uncertainty on the timing, possibility and financial impact of a potential disengagement. Implementing the current business plan, while continuing to support loss-making operations in New Caledonia, would likely lead to a financial profile that is more commensurate with a BB rating,” Fitch said in a press release.

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