Allegheny Technologies (ATI) Placed on Review for Downgrade at Moody's

Moody's Investors Service placed Allegheny Technologies' (NYSE: ATI) Baa3 senior unsecured ratings under review for possible downgrade.

On Review for Possible Downgrade:

..Issuer: Allegheny Ludlum Corporation

....Senior Unsecured Regular Bond/Debenture (Local Currency) Dec 15, 2025, Placed on Review for Possible Downgrade, currently Baa3

..Issuer: Allegheny Technologies Incorporated

....Multiple Seniority Shelf (Local Currency) May 29, 2015, Placed on Review for Possible Downgrade, currently (P)Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Jun 1, 2019, Placed on Review for Possible Downgrade, currently Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Jan 15, 2021, Placed on Review for Possible Downgrade, currently Baa3

....Senior Unsecured Regular Bond/Debenture (Local Currency) Aug 15, 2023, Placed on Review for Possible Downgrade, currently Baa3

Outlook Actions:

..Issuer: Allegheny Ludlum Corporation

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

..Issuer: Allegheny Technologies Incorporated

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

RATINGS RATIONALE

The review results from the continuing weak debt protection metrics as evidenced by the EBIT/interest and debt/EBITDA ratios for the twelve months ended June 30, 2014 of 0.1x and 9.2x respectively and our expectation that improvement in financial metrics could be over a longer time horizon than appropriate for the current rating. While we believe that the downward pressure on earnings has bottomed, improvement in end markets remains at a modest pace while the benefits from the strategic investment in the Hot-Rolling and Processing Facility (HRPF) and the Rowley premium quality qualification program currently in process will only likely be evident over the 2015/2016 time frame. During this period, ongoing associated costs and less than optimal capacity utilization levels are likely to persist.

Moody's review will focus on the likelihood for improvement in shipment levels and prices on strengthening market fundamentals as well as the likelihood of increased value added products in the overall product sales mix. The review will also assess ATI's cash generating ability relative to capital expenditures, dividends and other requirements and cash burn relative to liquidity sources, which include $355 million of cash at June 30, 2014 and a $400 million revolving credit facility (roughly $5 million used for letter of credit issuance). Given the likelihood of weaker EBIT on a forward rolling four quarter basis as the benefit of the asset sale in the December 2013 fourth quarter rolls off and interest expense increases due to reduced capitalized interest given completion of the HRPF project, the review will also focus on ATI's covenant compliance. The conclusion of the review is unlikely to result in more than a one notch downgrade.

You May Also Be Interested In

• SAP Q1 results fall short of Wall Street estimates as transformation kicks off
• Novartis (NVS) Tops Q1 EPS by 13c, raises guidance
• Cathay General Bancorp (CATY) Reports In-Line Q1 EPS