S&P Downgrades Carpenter Technology (CRS) to 'BBB-'; Outlook is Negative

November 28, 2016 3:39 PM EST

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S&P Global Ratings said it lowered its ratings, including its corporate credit rating, on Carpenter Technology Corp. (NYSE: CRS) to 'BBB-' from 'BBB'. The outlook is negative.

"The negative outlook reflects our view that Carpenter's adjusted debt to EBITDA will be about 4x in fiscal 2017, which is at the upper end of the 3x to 4x range expected for the rating," said S&P Global Ratings credit analyst William Ferara. "We expect sales to remain under pressure due to weak demand in some of the company's end markets," he said.

We could consider a lower rating over the next 24 months if there were sustained pressure on operating margins, continued weakness in the company's key markets, and adjusted leverage remains notably above 4x in fiscal 2017 and we did not expect improvement by the end of calendar year 2017. A lower liquidity profile assessment could also lead to a downgrade if the company does not refinance its revolving credit facility by more than one year in advance of its June 2018 maturity. Sustained pressure on the company's business, with our focus on the company's product demand and profitability metrics, could also lead to a lower rating.

We could revise the outlook to stable if the company's credit ratios strengthen, such as debt to EBITDA being sustained notably below 3.5x, and end market demand improves. An upgrade seems less likely in the next 24 months due to expected pressure in the company's end markets and resulting elevated debt leverage.



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