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Announcement:

Moody's reviews AK Steel's ratings for downgrade, lowers liquidity rating to SGL-3

Global Credit Research - 21 Sep 2012

Approximately $950 million of debt placed under review

New York, September 21, 2012 -- Moody's Investors Service ("Moody's") placed AK Steel Corporation's (AK STEEL) B1 corporate family and probability of default ratings as well as the company's B2 senior unsecured notes and revenue bond ratings under review for possible downgrade. The revenue bonds have separate loan agreements with AK Steel Corporation, guaranteed by AK Steel Holding Corporation and are ultimately obligations of the company. At the same time, Moody's downgraded the Speculative Grade Liquidity Rating to SGL-3 from SGL-2.

Downgrades:

..Issuer: AK Steel Corporation

.... Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2

On Review for Possible Downgrade:

..Issuer: AK Steel Corporation

.... Probability of Default Rating, Placed on Review for Possible Downgrade, currently B1

.... Corporate Family Rating, Placed on Review for Possible Downgrade, currently B1

....Senior Unsecured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently B2

....Senior Unsecured Shelf, Placed on Review for Possible Downgrade, currently (P)B2

..Issuer: Butler County Industrial Dev. Auth., PA

....Senior Unsecured Revenue Bonds, Placed on Review for Possible Downgrade, currently B2

..Issuer: Ohio Air Quality Development Authority

....Senior Unsecured Revenue Bonds, Placed on Review for Possible Downgrade, currently B2

..Issuer: Rockport (City of) IN

....Senior Unsecured Revenue Bonds, Placed on Review for Possible Downgrade, currently B2

Outlook Actions:

..Issuer: AK Steel Corporation

....Outlook, Changed To Rating Under Review From Stable

RATINGS RATIONALE

The review for downgrade reflects the deterioration in AK Steel's debt protection metrics as a result of ongoing weakness in operating performance and net losses being incurred. Given the headwinds facing the steel industry, downward pressure on steel prices, and slowing economic fundamentals, we anticipate that performance will continue to evidence a negative trend. In addition, although the company should benefit, on a lag basis, from some cost improvement given the decline in iron ore and coking coal prices, the likely volume and price compression will outweigh such potential benefit.

The review will focus on the company's cost position, outlook for end markets served, particularly automotive, a key market for AK Steel, and capital expenditure requirements for AK Coal and Magnetation LLC.

The downgrade of the Speculative Grade Liquidity rating to SGL-3 reflects the weaker operating cash flow generation capability and higher reliance on the $1.1 billion asset backed revolving credit facility (ABL - $325 million drawn at June 30, 2012 versus $250 million at December 31, 2011). Although we would anticipate that some seasonal reversal of working capital requirements will occur by the fourth quarter, the weaker earnings performance will continue to pressure the level of operating cash flow that can be generated. The SGL-3 acknowledges the lack of meaningful debt maturities over the next twelve to eighteen months and the availability under the ABL.

The principal methodology used in rating AK Steel was the Global Steel Industry Methodology published in January 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Headquartered in West Chester, Ohio, AK Steel is a middle tier, high quality, integrated steel company producing flat-rolled carbon steels, including coated, cold-rolled and hot-rolled steels as well as specialty stainless and electrical steels. Revenues for the twelve months through June 30, 2012 were $6.1 billion and steel shipments were approximately 5.5 million tons.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Carol Cowan
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's reviews AK Steel's ratings for downgrade, lowers liquidity rating to SGL-3
No Related Data.

 

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