S&P cuts Noranda Aluminum Holding facility to 'CC'

May 7 - Standard & Poor's Ratings Services said today that it lowered its rating on Noranda Aluminum Holding Corp.'s [XTAAH.UL] senior secured credit facilities to 'CC' (the corporate credit rating is 'SD') from 'B'. At the same time, Standard & Poor's lowered the recovery rating to '3', indicating our expectation of meaningful (50%-70%) recovery in the event of a payment default, from '1'. In addition, we lowered the recovery rating on the company's senior unsecured floating rate notes due 2015 to '6', indicating our expectation of negligible (0% to 10%) recovery in the event of a payment default, from '5'. The issue-level rating on the notes remains unchanged at 'D'. The senior secured rating remains on CreditWatch with negative implications where it was initially placed on Nov. 12, 2008. "This rating action follows our assessment of the company's amendment to its bank facility that permits it to repurchase amounts outstanding under the facility at a discount from par utilizing an auction, which extends until Sept. 15, 2010," said Standard & Poor's credit analyst Sherwin Brandford. Under our criteria, (see "Rating Implications of Exchange Offers And Similar Restructurings," published Jan. 28, 2009, on RatingsDirect) we view a formal cash tender offer at a discount by a company under substantial financial pressure as a distressed debt exchange and tantamount to a default. With lenders' approval, we now expect Noranda to commence an auction soon and to apply up to $400 million that is available under the settlement of its aluminum hedges, which monetizes certain 2010-2012 aluminum sale swaps. The rating on Noranda's senior secured credit facilities will remain on CreditWatch with negative implications until such time that the debt is repurchased below par at the auction. When and if this happens, barring other factors, we expect to lower the issue-level rating on the facility to 'D'. We would expect to assign a new corporate credit rating to Noranda, representative of our assessment of its credit risk following the completion of the final round of debt repurchases. Complete ratings information is available to RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating. Primary Credit Analyst: Sherwin Brandford, New York (1) 212-438-5882; sherwin_brandford@standardandpoors.com