Moody's assigned March 29 a first time issuer corporatefamily rating of B3 and B3-PD probability default rating to , with a positive outlook.
"The B3 [rating] reflects the company's high Moody's-adjustedleverage and the company being free cash flow negative at the end of 2015,"said Hubert Allemani, a vice president-senior analyst at the rating agency.
However, Moody's expects the Finland-based stainless steelmanufacturer to improve its financial performance and achieve better cash flowprotection metrics this year.
"We also note Outokumpu's leading market positions inboth Europe and the U.S., as well as our expectations that the company willimprove the profitability of its Coil Americas, while continuing therestructuring efforts throughout the group," Allemani added.
The restructuring programs enacted by Outokumpu over thepast three years, including closure of capacity in Europe, will bear fruit overthe next two years, Moody's said. The gains realized through restructuring andcost efficiency measures will improve the company's cash generation, with thestainless steel manufacturer expected to become free cash flow positive orneutral this year.
The positive outlook reflects Moody's expectations thatOutokumpu will improve its EBIT and EBITDA over the next year such that creditmetrics are more in line with the single B rating category.
In response to the rating, CEO Roeland Baan said: "Outokumpu'spriority will remain on improving financial position of the company anddeleveraging through further improvement in profitability and free cash flowgeneration in order to continuously improve such ratings."
Moody's also rated the company's €250 million senior securedfixed-rate notes due September 2019 at B2, reflecting the benefit from thesecurity package, the guarantees in place and their priority in right ofpayment against the existing unsecured indebtedness.