OREANDA-NEWS. S&P Global Ratings said today it affirmed its 'BB-' corporate credit rating on Oxbow Carbon LLC. The outlook remains stable.

At the same time, we affirmed our 'BB' issue-level rating on the company's first-lien term loans and revolving credit facility, with a '2' recovery rating. We also affirmed the 'B+' issue-level rating on the company's second-lien term loan, with a '5' recovery rating. The '2' recovery rating reflects our expectation of substantial (70%-90%, upper half of the range) recovery in the event of a default. The '5' recovery rating reflects our expectation of modest (10%-30%; upper half of the range) in the event of default.

"The stable outlook reflects our expectation that Oxbow's adjusted debt to EBITDA will fall back below 5x in the next 12 months," said S&P Global Ratings credit analyst Vania Dimova. "This is consistent with our leverage range expectation for the credit and reflects an improvement of aluminum prices and end market growth. We expect the company to maintain relatively steady operating and financial performance and use its available cash flow to pay down debt. We expect the company to maintain an adequate liquidity position."

We could lower our rating if market and price conditions weaken from current levels and adjusted debt to EBITDA is sustained above 5x beyond the end of the fourth quarter of 2016, when the consolidated leverage covenant steps down to 4.75x. This could occur if the global oversupply of key commodities further pressure cash flows, which would keep prices low and hinder Oxbow's margins and profitability. We could lower the rating if the liquidity becomes less than adequate or if the company's investors exercise an exit sale.

We would raise our rating if debt to EBITDA improves and stays below 4x and FFO to debt climbs to about 20% on a sustained basis. We would also expect any improvement in operating conditions would result from higher global commodities prices on better supply and demand conditions.