Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
05 Feb 2004
MOODY'S UPGRADES RUSSEL METALS AND ASSIGNS Ba3 TO PROPOSED SR. NOTES; STABLE OUTLOOK
Approximately US$530 Million of Rated Debt Affected
New York, February 05, 2004 -- Moody's Investors Service upgraded its ratings for Russel Metals
Inc., raising its senior implied rating to Ba2 from Ba3,
and assigned a Ba3 rating to the company's proposed offering of
senior unsecured notes. The company has a stable rating outlook.
The following ratings were upgraded:
(i) Russel's senior implied rating upgraded to Ba2 from Ba3,
(ii) senior unsecured issuer rating upgraded to Ba3 from B1,
(iii) C$254 million senior secured revolving credit facility maturing
June 2005, upgraded to Ba1 from Ba2,
(iv) US$115.6 million of 10% guaranteed senior unsecured
notes due 2009, upgraded to Ba3 from B1,
(v) C$30 million of 8% subordinated debentures due 2006,
upgraded to Ba3 from B1, and
(vi) C$30 million of 7.5% cumulative redeemable preferred
shares, upgraded to B2 from B3.
Moody's also assigned a Ba3 rating to Russel's proposed offering
of US$175 million of senior unsecured notes due 2014. Net
proceeds from the new senior notes and from a C$45 million equity
offering will be used to repurchase the 10% senior notes,
8% subordinated debentures, and 7.5% preferred
shares, and reduce borrowings under the credit facility.
Following the refinancing, Russel will have debt of approximately
C$242 million and book equity of C$303 million, consisting
solely of common stock.
The rating upgrades reflect the company's solid competitive position
in the Canadian metal service center industry, a history of stable
cash flow throughout a full economic cycle, discerning and superior
management, and relatively low leverage. The long-term
ratings also acknowledge the counter-cyclical nature of Russel's
working capital needs and its good liquidity.
The ratings are constrained by the sensitivity of Russel's financial
performance to general economic conditions and its dependence on cyclical
end-use industrial sectors such as manufacturing, construction,
transportation, and energy. The company's operating
margins are fairly low, 3-6%, as befits its
service center and steel import/export operations, and margins and
cash flow can be pressured by fluctuating steel selling prices and imports.
The recent surge in steel prices should bolster Russel's margins
in the short-term, but is expected to increase its working
capital investment, which could increase credit facility borrowings.
When steel prices decline, as they inevitably will, Russel's
margins will very likely narrow. The ratings also take into account
the potential for Russel to continue to expand through acquisitions and
the risk this entails.
Russel's stable rating outlook reflects its relatively solid cash
flow, particularly during downcycles when it reduces metal purchases
in response to slower customer demand, its demonstrated ability
to adjust its operations to a reasonable range of economic conditions,
its prudent approach to acquisitions and its balance sheet, and
good liquidity. Its ratings or outlook could be lowered if it was
unable to achieve historical margins over an extended period, working
capital management failed to counter an economic or industry downturn,
or it altered its past aversion to risk, for example in connection
with its steel import/export segment or acquisition strategy. Prerequisites
for an upgrade include an extended period of consistently strong financial
performance and a commitment to significantly lower debt levels.
Russel's free cash flow (CFO minus capex) was positive in four of
the last five years, despite the challenges of operating in the
metals distribution sector. Free cash flow averaged C$49
million per year over the four-and-one-half years
ending June 30, 2003. It is notable that in the years when
Russel's free cash flow was weakest, 2000 and 2002,
steel demand and prices were rising. Conversely, when demand
from its industrial customers was declining, Russel was able to
reduce its working capital investment and its debt, as occurred
in 2001 and 2003, when cash generated by working capital changes
was C$55 million and C$112 million, respectively.
Management has also been proactive in fixing or disposing of underperforming
operations, such as Total Distributors and the US operations of
Acier Leroux, and Moody's expects this cold-eyed realism
will continue. This attention to business is critical when operating
margins are inherently slim.
The proposed refinancing, including the announced C$45 million
equity offering, will allow Russel to simplify its balance sheet,
remove costly preferred shares, and get pro forma debt to around
C$242 million, or around 2.5 times annualized 2H2003
EBITDA (C$49 million), which includes the contribution of
Leroux since it was acquired on July 3, 2003. The Leroux
acquisition enabled significant rationalization of Russel's Quebec
operations and associated working capital reductions.
While Moody's expects Russel's 2004 operating results will
be similar to pro forma 2003, the recent sharp rise in steel prices
and the potential need for Russel to rebuild inventory are likely to increase
working capital investment and may elevate debt balances. The performance
of Russel's energy sector distribution segment is difficult to predict
but it could enjoy a good year due to high oil and gas prices and a rising
Canadian drill rig count. Based on Moody's expectation of
increased credit facility borrowings in 2004, and acknowledging
lower average interest rates following the refinancing, Moody's
anticipates Russel's debt to EBITDA ratio will be under 3 times
and EBITDA to interest around 5 times.
The Ba1 rating for Russel's Canadian credit facility, one
notch above the senior implied rating, reflects the benefits of
the credit facility's covenants and security package, which
includes trade accounts receivable and inventories of a significant portion
of the company's operations. Russel's net working capital
modestly exceeds potential maximum borrowings under both its Canadian
and US credit facilities, but the company's fixed assets are
relatively small. Therefore, Moody's has rated the
senior unsecured notes Ba3, one notch below the company's
senior implied, reflecting the uncertain asset coverage of the notes
in the event Russel incurred a high level of secured debt, the effective
subordination of the notes to borrowings under the credit facilities,
and structural subordination to the debt and liabilities at Russel's
subsidiaries that do not guarantee the notes.
Russel Metals Inc., a Canadian company headquartered in Mississauga,
Ontario, operates steel service centers and conducts international
steel trading activities throughout North America.
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit 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 or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.