Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's Downgrades Noranda's ratings (CFR to Caa1); Outlook negative

Global Credit Research - 20 Aug 2015

New York, August 20, 2015 -- Moody's Investors Service downgraded Noranda Aluminum Acquisition Corporation's ("Noranda") Corporate Family Rating (CFR) to Caa1 from B3 and Probability of Default rating to Caa1-PD from B3-PD. At the same time Moody's downgraded Noranda's senior secured term loan rating to Caa1 from B2 and senior unsecured debt rating to Caa3 from Caa2. The speculative grade liquidity rating remains unchanged at SGL-3. The outlook is negative.

..Issuer: Noranda Aluminum Acquisition Corporation

Downgrades:

.... Corporate Family Rating (Local Currency), Downgraded to Caa1 from B3

.... Probability of Default Rating, Downgraded to Caa1-PD from B3-PD

....Senior Secured Term Loan (Local Currency) due 2019, Downgraded to Caa1, LGD3 from B2, LGD3

....GTD Sr Global Notes (Local Currency) due 2019, Downgraded to Caa3, LGD5 from Caa2, LGD5

Unchanged:

...Speculative Grade Liquidity Rating, Unchanged at SGL-3

Outlook Actions:

....Outlook, Changed To Negative From Stable

RATINGS RATIONALE

The downgrade in the CFR to Caa1 reflects Noranda's weak debt protection metrics, high leverage, operational and cost challenges and the headwinds facing primary aluminum producers, which are expected to result in weaker performance over the balance of 2015. Improving trends evidenced in the company's performance, driven in part by the historically high Midwest premiums have turned negative and Noranda's performance in the quarter ended June 30, 2015 contracted due to the decrease in aluminum prices and Midwest premiums as well as operational challenges and other cost items such as the levy paid under the interim agreement with the Government of Jamaica (GoJ). In combination, these and other seasonal factors increased the company's cost position. While some of these costs, such as peak power usage expenses and the levy amount, will lessen in the balance of the year, aluminum prices and Midwest premiums have continued to fall and downward pressure on prices is expected through the balance of 2015. We expect Noranda's debt protection metrics to weaken further and leverage to increase. While Noranda's Flat-Rolled segment operations continue to perform within reasonable earnings levels on strengthening shipment levels, the company's consolidated earnings performance remains leveraged to its primary smelter operations.

As there is an approximate one month lag in Midwest premium realizations, Noranda's realized prices in its primary segment are expected to contract over the balance of 2015 and as a consequence leverage and debt protection will deteriorate further in the second half of 2015 (debt/EBITDA was 7.1x for the twelve months ended June 30, 2015). Given fundamentals in the aluminum market, excess global aluminum capacity and slowing growth rates in China, aluminum prices and premiums are anticipated to remain pressured well into 2016.

Noranda's only smelter is operating at sub-optimal capacity due to pot line replacement requirements and a slowing in the ramp-up due to the weak market conditions. This is leading to inefficient fixed cost capacity absorption. Additionally, Noranda is currently in a dispute with the GoJ over production levies on bauxite production, which is temporarily increasing costs for its bauxite operations. Noranda and GoJ are operating under an interim agreement until the earlier of December 31, 2015 or the date arbitration is concluded. Further contributing to Noranda's challenges is a recent explosion in its cast house at the New Madrid facility, which is expected to have a negative impact on the company's value added product mix for the duration of 2015.

The LME Aluminum price has dropped by more than 20% from a high of $0.93/lb in November 2014 to a current level of approximately $0.69 cents and is evidencing continued downward pressure. Additionally, the Midwest aluminum premiums (the premium Noranda earns for primary aluminum in excess of the LME price) has fallen by more than 65% to roughly $0.075/lb over the same time period. Given the slowing growth of the Chinese economy, we expect the overall global aluminum market to remain in surplus and continue to pressure aluminum prices over the near to medium-term. Although the company's downstream operations are less impacted by LME prices and add a level of relative stability, we expect that overall performance will continue to be driven by the more commodity-like primary aluminum, bauxite and alumina segments.

Noranda should see an improving trend in its cost position in 2016 once the smelter is ramped back up to full capacity and as a result of the company's recent completion of its Jamaican port expansion. Additionally, completion of other key capital projects, including the new rod mill at the New Madrid plant, will lead to increases in productivity beginning in the second half of 2016. Noranda will also benefit from a reduced electricity rate from Ameren Missouri following the Missouri Public Service Commission's April 2015 ruling, but the new rate is less favorable than anticipated and is currently being challenged by Ameren. In addition, due to the peak power payment requirements, performance on a quarter-to-quarter basis will fluctuate.

While these cost benefits will improve Noranda's competitive position over time, they will only partially offset the decline in realized prices. Additionally, Noranda's reliance on a single smelter and refinery leaves the company exposed to any future disruptions at the New Madrid, Missouri smelter and Gramercy, Louisiana refinery.

The rating considers the company's strong relationships with its customer base and good position within markets served.

The Caa1 senior secured term loan rating reflects its priority position in the capital structure relative to the senior unsecured notes. Borrowings under the term loan are secured on a first priority basis on assets other than inventory and accounts receivables, which are pledged on a first lien basis to the ABL ("ABL priority collateral"). The term loan has a second lien position on the ABL collateral. The Caa3 rating on the senior unsecured notes reflects the effective subordination of these instruments to a substantial amount of first lien secured debt and priority accounts payables, and the expectation of a considerable loss in value in a default scenario.

The SGL-3 speculative grade liquidity rating reflects the company's $24 million cash position at June 30, 2015, and borrowing base capacity of $134.6 million under its asset backed credit facility expiring in February, 2017. The company is expected to be minimally cash consumptive over the next 12-18 months but has no debt maturities until 2019. However, the contraction in aluminum prices, should they decrease below current levels, will contribute to a contraction in borrowing base availability.

The negative outlook incorporates our expectation that metrics will deteriorate further in the second half of 2015 and into 2016 as the company's operating results are impacted by the falling aluminum prices and premiums. It also captures the possibility that, given the weak market fundamentals, aluminum pricing will remain suppressed over the intermediate term. The outlook also reflects the uncertainty that Noranda is able to successfully improve the reliability of its smelter operations, achieve its stated cost objectives, and complete its remaining capital projects while maintaining adequate liquidity.

Ratings are unlikely to be upgraded over the next twelve to eighteen months given the expectations for weak performance and profitability.

Noranda's ratings could be downgraded if liquidity continues to deteriorate or if Debt/EBITDA is sustained above 7.25x and EBIT/interest is sustained below 0.1x.

The principal methodology used in these ratings was Global Steel Industry published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Headquartered in Franklin, Tennessee, Noranda Aluminum Acquisition Corporation (Noranda) is involved in primary aluminum production at its New Madrid, Missouri smelter and in downstream operations through four rolling mills. In addition, Noranda has a 100% interest in an alumina refinery in Gramercy, Louisiana and through its wholly owned subsidiary, St. Ann Bauxite Holdings Ltd., ultimately owns 49% of a bauxite mining operation in St. Ann, Jamaica. The group's ultimate parent is Noranda Aluminum Holding Corporation. During the twelve months ending June 30, 2015, Noranda shipped approximately 436.8 million pounds of primary aluminum to external customers and 383.6 million pounds of fabricated products, generating revenues of $1.4 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Carol Cowan
Senior Vice President
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 Downgrades Noranda's ratings (CFR to Caa1); Outlook negative
No Related Data.
© 2017 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. 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.

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 SUCH 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 appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. 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. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

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 appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.