Schmolz Declines After S&P Says Covenants at Risk: Zurich Mover
The stock traded 1.5 percent lower at 2.58 francs as of 9:47 a.m. in Zurich, bringing the decline this year to 52 percent. Trading volume was about 40 percent the six-month average.
S&P downgraded the steelmaker’s credit rating to B- from B yesterday and said it may cut it again if Schmolz doesn’t succeed in renegotiating covenant agreements on its debt. Earnings before interest, tax, depreciation and amortization in 2012 will probably drop about 53 percent, more than the ratings company had expected, S&P added.
Schmolz gets about a third of its sales from the European car industry, which is likely to suffer from a “protracted recession” in 2013, the ratings company said. European Union car sales fell to a 19-year low in the first 11 months of 2012, a report showed last week.
“After obtaining covenant waiver approvals from the core banks for the rest of 2012, the company’s management will likely take proactive actions to ensure covenant compliance next year,” S&P said. “However, what approach the banks will take is difficult to foresee in the context of lingering industrial weakness in Europe and their own reduced risk appetite.”
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