S&P Cuts Allegheny Technologies (ATI) to Junk

Standard & Poor's Ratings Services said today that it lowered its corporate credit rating on Pittsburgh-based Allegheny Technologies (NYSE: ATI) to 'BB+' from 'BBB-'. The outlook is stable.

We lowered the rating on the company's senior unsecured notes to 'BB+' from 'BBB-'. We assigned a '3' recovery rating to the senior unsecured debt, indicating our expectation for meaningful (lower half of the 50% to 70% range) recovery in the event of payment default.

The downgrade reflects our view that ATI's credit metrics will remain more in line with expectations for a 'BB+' rating rather than 'BBB-'. By year-end 2014, debt to EBITDA was 6x compared with our expectations that the company would achieve roughly 4.5x when we revised the outlook to negative in early 2014. We revised ATI's financial risk profile to "aggressive" from "significant," based on expected leverage and cash flow coverage ratios under our base-case forecast.

"We estimate debt to EBITDA and EBITDA interest coverage will be about 4.5x and 3.0x, respectively, in 2015," said Standard & Poor's credit analyst William Ferara.

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