Moody's rates AGY note B2

Moody's Investors Service said it assigned a B2 rating with a loss-given-default assessment of LGD4 (54%) to AGY Holding Corp.'s proposed $175 million eight-year second-lien senior secured notes and affirmed its B2 corporate family rating.

The outlook is stable.

The new notes will refinance the debt issued on April 7, 2006, when AGY was acquired by Kohlberg & Co. in a transaction valued at $271 million, excluding fees and expenses. The acquisition was financed with $210 million of senior secured credit facilities and cash. As part of this refinancing, AGY also plans to arrange a privately placed $40 million five-year first-lien senior secured asset-based revolver.

Moody's said the new debt provides additional flexibility by lengthening the company's maturity schedule with no amortizing debt. The ratings remain constrained, however, by AGY's substantial leverage resulting from the purchase of virtually all of Kohlberg's outstanding equity interests and by AGY's small size, customer and application concentration, ongoing margin compression from input cost inflation, the speculative-grade credit quality of some of the company's main customers and AGY's exposure to several highly cyclical end-use markets.

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