Moody's rates PNA Group notes B3

Moody's Investors Service said it assigned a B3 rating to $250 million of proposed senior unsecured notes due 2016 being issued by PNA Group, Inc. and a B1 corporate family rating to the company.

The outlook is stable.

PNA's ratings reflect its moderate size, favorable market position and geographic, product and end-market diversification. The ratings also recognize the generally stable cash flow of steel distributors due to the correlation between selling prices and metal purchases, the countercyclical nature of working capital and modest capital expenditures.

However, PNA's ratings also reflect its high leverage, modest profit margins typical of metal distributors, the potential for the company to make acquisitions, for which it does not have an established track record, and the potential for new owner, Platinum Equity, to take equity distributions disproportionate to PNA's free cash flow, the agency said.

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