S&P assigns Novelis notes BB-

S&P said it assigned its BB- issue-level and 4 recovery ratings to Novelis Inc.'s proposed €500 million of senior unsecured notes issued by wholly owned subsidiary Novelis Sheet Ingot GmbH. The 4 recovery rating indicates an expectation for average (30%-50%, rounded estimate: 30%) recovery in default.

“We also raised our issue-level rating on parent Novelis' existing unsecured notes to BB- from B+ and revised our recovery rating on the notes to 4 from 5. The upward revision to estimated recovery prospects primarily reflects the decline in the amount (and proportion) of Novelis' secured debt relative to total debt in our analysis. This follows the anticipated partial repayment of Novelis' secured term loan due 2022, which increases the enterprise value (EV) available to unsecured creditors in our default scenario,” the agency said in a press release.

The company plans to use the proceeds initially to repay a portion of the 2022 term loan and allocate an amount equal for eligible green projects in the future. Novelis also disclosed the repayment of the remaining amount outstanding under its unsecured bridge loan, associated with its Aleris acquisition, from cash and partial refinancing of its 2022 term loan with a new $500 million secured term loan due 2028, the agency said.

“On completion of the proposed issuance, we expect an approximate $600 million net reduction in Novelis' total secured debt outstanding. The remaining $600 million on the 2022 term loan is expected to be repaid from internal cash generation,” S&P said.

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