S&P may still cut OM Group corporate credit rating Thu December 19, 2002 04:34 PM ET
(The following statement was released by the rating agency)
NEW YORK, Dec 19 - Standard & Poor's Ratings Services said today that its 'B+' corporate credit rating on metal-based specialty chemical and refined metal products producer OM Group Inc. remains on CreditWatch with negative implications, following management's announcement of details of its restructuring program. Cleveland, Ohio-based OM Group has about $1.2 billion of debt outstanding.
"The sale of non-core assets, and planned reductions in work force expenses and in manufacturing and administrative costs will benefit weak earnings and cash flow measures," said Standard & Poor's credit analyst Wesley E. Chinn. "Still, resolution of the CreditWatch listing awaits in part the outcome of management's reviewing strategic alternatives, including seeking a financial partner, for its precious metals business."
The recent amendment of debt covenants provides OM Group with time to implement its restructuring program and the opportunity to pursue the reinstatement of metal lease facilities to a normal level. The company will record a restructuring charge in the fourth quarter of 2002 of up to $335 million, of which the cash portion (principally for severance costs) is expected to be approximately $38 million - $43 million.
The sale of non-core assets (including the SCM-powdered metals activity, tungsten carbide technology and assets, and the PVC heat stabilizer product line) and potential proceeds of up to $100 million would enhance prospects that OM Group will be cash flow positive in coming quarters as it attempts to reduce its heavy debt load substantially. Total debt to EBITDA is expected to remain aggressive in the 5x-6x range in the near term.
Assuming a successful monetization of the precious metals operation, resolution of the CreditWatch is also contingent on a discussion with management to review:
-- OM's exposure to commodity price risk and the potential price of cobalt during the next few years;
-- The cobalt supply situation in the Congo; and
-- Intermediate- to long-term business fundamentals and related financial prospects at OM Group's traditional non-precious metals activities because any assessment of the business profile will have to focus on these activities pro forma for the possible sale of the precious metals businesses. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.
Market Data 
Markets 
AI
