S&P cuts Metso to junk

Standard & Poor's said it lowered its long-term corporate credit and senior unsecured debt ratings on Finland-based machinery and engineering group Metso Corp. to BB+ from BBB and to BB from BBB, respectively, and removed these ratings from CreditWatch.

At the same time, the short-term corporate credit rating on Metso was lowered to B from A-3 and removed from CreditWatch.

The outlook is stable.

"The rating actions reflect Metso's weaker-than-expected operating performance and financial profile, and an increasingly competitive market environment that will make it hard for Metso to materially improve earnings and cash flows during the next few years," said S&P credit analyst Alf Stenqvist.

S&P said that for full-year 2003, EBITDA fell by about 30% to about €265 million (before large restructuring costs), and EBITDA net interest coverage was down to about 3.5x. Although Metso has initiated measures to improve operating efficiency and the balance sheet, prospects for material recovery in the near term are bleak.

S&P said the ratings on Metso reflect the group's good market positions in cyclical and competitive capital goods segments, geographically diversified earnings base, relatively weak operating performance, and currently high debt levels.

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