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.
Global Credit Research - 14 Apr 2010
New York, April 14, 2010 -- Moody's Investors Service moved GrafTech International Ltd.'s
(GrafTech) rating outlook to positive from stable, assigned a Ba1
rating to new $230 million senior secured revolving credit facility,
affirmed its Ba2 Corporate Family Rating (CFR) and moved its Probability
of Default (PDR) rating to Ba3. The new revolving credit facility
will replace the company's existing undrawn $215 million
revolver maturing in July 2010.
The following summarizes the ratings.
GrafTech International Ltd.
Corporate Family Rating -- Ba2
Speculative Grade Liquidity rating -- SGL3
Probability of default rating -- Ba3 (from Ba2)
GrafTech Finance Inc.
Gtd sr sec revolving credit facility due 2013 -- Ba1 (LGD2,
Rating to be withdrawn upon completion of new revolver
Gtd sr sec revolving credit facility due 2010 -- Ba1 (LGD2,
24%) from Ba1 (LGD3, 36%)
The move to a positive outlook reflects our expectations that the company
will produce positive free cash flow over the next four quarters,
generate metrics supportive of a higher rating despite the possibility
of adding leverage (in conjunction with an acquisition or investments)
and maintain adequate liquidity. GrafTech is under levered for
its rating category after significant debt reduction in 2007-2009
that repaid all of its balance sheet debt, but the company is expected
to increase its leverage either by pursuing acquisitions and/or investment
opportunities, or recapitalizing its balance sheet. The rating
and outlook incorporates the expectation that the company could increase
net debt toward $500 million or more within the next two years.
If these potential investments or recapitialization are financed in a
manner consistent with management's stated financial policies, the
company could support a higher rating. The relative stabilization
and moderate growth of the global economy is expected to lead to a significant
rebound in demand for the company's graphite electrodes from the
anemic levels in 2009.
We view the refinancing of the company's revolver as a positive
for its liquidity and would expect to upgrade GrafTech's Speculative
Grade Liquidity (SGL) rating to SGL1 (from SGL3) upon completion of the
transaction. The company's liquidity is expected to be supported
by positive free cash flow in 2010, the new $230 million
revolving credit facility due 2013 and cash balances ($50 million
as of December 31, 2009). Additionally, the company
has an accounts receivable securitization program ($25 million)
and supply chain financing agreement ($50 million) that are renewed
on an annual basis. The new revolver will have an accordion feature
allowing commitments to be expanded to $340 million, subject
to bank approval. The new facility does have financial covenants
(Sr. Secured Leveraged Ratio and Coverage Ratio) that can limit
availability if earnings decline significantly from current levels.
The new revolver's issue rating was assigned in accordance with
Moody's loss given methodology and reflects the use of an expected
recovery rate for firm of 65% in the case of a distressed scenario
due to the all bank debt structure. (A recovery rate of 50%
was used in the past when GrafTech had both bank debt and notes in its
capital structure, however it repaid the remaining portion of its
notes in 2009.) As a result of the increase in recovery rate,
the Probability of Default (PDR) rating was moved to Ba3 from Ba2.
GrafTech has a relatively narrow product line, significant market
shares in the markets in which it competes and relatively low cost manufacturing
facilities located on four continents. However, the company
does have exposure to cyclical end markets (the steel industry) and to
volatile raw materials costs (needle coke accounts for approximately 40%
of the manufacturing cost of graphite electrodes) and energy costs,
which are not correlated with the price of steel. Limited leverage
in negotiating pricing with its suppliers and the fact that its customers
are large steel producers gives the company limited ability to control
its margins throughout the business cycle. GrafTech has recently
had a good track record of cash flow generation, producing meaningful
amounts of positive free cash flow in each of the last three years,
despite the economic downturn.
Moody's most recent announcement concerning the ratings for GrafTech was
on March 3, 2009, when GrafTech's speculative grade liquidity
rating was lowered to SGL-3 as a result of an expected decline
in the company's near-term cash flows.
The principal methodology used in rating GrafTech is Moody's Updated Global
Chemical Industry rating methodology, published in December 2009,
and available on www.moodys.com website in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
GrafTech International Ltd., headquartered in Parma,
Ohio, is a leading global manufacturer of graphite electrodes,
and other graphite products. Revenues were $659 million
for the LTM ended December 31, 2009.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Moody's moves GrafTech's outlook to positive; rates new revolver Ba1
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2016 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 CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY’S (“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.