5:03p ET May 12, 2014 (Dow Jones) Print Press Release: S&P Raises Kaiser Aluminum Rating to 'BB', Outlook Stable
The following is a press release from Standard & Poor's:
-- We expect U.S.-based Kaiser Aluminum Corp.'s credit measures to
improve on EBITDA growth and lower absolute debt levels next year.
-- We are raising our corporate credit rating on Kaiser Aluminum Corp. by
one notch to 'BB' from 'BB-'. At the same time, we are raising our issue-level
rating on the company's $225 million 8.25% senior notes to 'BB' from 'BB-'.
-- The stable outlook indicates our expectation that the company will
continue to grow organically and improve operational efficiencies while
maintaining leverage comfortably below 3x EBITDA with interest coverage in the
6x to 10x range.
NEW YORK (Standard & Poor's) May 12, 2014--Standard & Poor's Rating Services
said today it raised its corporate credit rating on Foothill Ranch,
Calif.-based Kaiser Aluminum Corp. to 'BB' from 'BB-'. The outlook is stable.
We simultaneously raised our rating on Kaiser's $225 million 8.25% senior
notes due 2020 to 'BB' from 'BB-'. The recovery rating on the notes remains
'3', reflecting our expectation of a meaningful (50%-70%) recovery in the
event of a payment default.
"The stable outlook reflects our expectations that favorable trends in the
aerospace and automotive markets will increase profitability and free cash
flow generation over the next two years," said Standard & Poor's credit
analyst Amanda Buckland. "In addition, the company's recent capacity expansion
and various upgrades should improve operational efficiency to meet near-term
demand without significant capital spending. We also expect management to
prudently balance growth and shareholder rewards in a manner that maintains
We could lower the rating if Kaiser's operating performance deteriorated
sharply, causing debt to EBITDA to climb and remain above 3x, because of an
unexpected industry downturn. We would also lower our rating if leverage
increased because of debt-financed dividends or share repurchases.
We view a further upgrade unlikely within the next year, given the limitations
in Kaiser's business risk profile as a specialty semifabricated aluminum
products company with limited earnings diversity given its large combined
exposure to the aerospace and automotive markets.
Disclosure: I am long KALU, NKE.