Pittsburgh, Pennsylvania-based Standard Steel LLC, the only US-based manufacturer of forged steel wheels and axles for freight railcars, locomotives and passenger railcars, has been placed on Credit Watch with positive implications, according to Standard & Poor (S&P) who indicated the rating would be raised to ‘B' if the company successfully issues the senior secured notes under the preliminary terms and conditions which they have reviewed.
S&P further assigned a ‘B' issue-level rating to the company's proposed new $135 million senior secured notes due 2015. The recovery rating on this debt is ‘3', indicating S&P's expectation of meaningful (50 percent to 70 percent) recovery in a payment default scenario.
S&P expects to affirm the ‘B' issue-level rating on the new notes if and when they raise the corporate credit rating to a ‘B'. The CreditWatch placement was based on the company's proposed $135 million senior secured notes issuance due 2014 and proposed $20 million asset-based loan (ABL) revolving credit facility due 2013. S&P expects the company to use the proceeds of the new notes to repay in full its existing term loans, which currently have limited covenant headroom. They believe the pending refinancing, if successful, would improve Standard Steel's liquidity position and debt maturity profile.
"The CreditWatch placement reflects our view that pending refinancing, if successful, would improve Standard Steel's liquidity position and debt maturity profile, leading us to raise the corporate credit rating by one notch to ‘B'," said Standard & Poor's credit analyst Robyn Shapiro. "We expect to resolve the CreditWatch placement on the company's completion of its pending notes issue and repayment of the existing term loans. We could remove the ratings from CreditWatch if the proposed debt issue is delayed or cancelled and financial covenant compliance remains a concern."