(Bloomberg) -- Swiss steelmaker Schmolz + Bickenbach AG’s bonds fell the most on record after S&P Global Ratings cut its credit score and warned a slump in Europe’s car industry may lead to a breach of its debt covenants.
The company’s bonds due July 2022 fell as much as 3.2 cents on the euro to 82 cents on Thursday, the lowest in a month and the biggest drop since they were issued in April 2017, according to data compiled by Bloomberg.
S&P downgraded the Lucerne, Switzerland-based company one notch to B, five levels below investment grade, citing weak demand from European car companies that’s likely to erode second-quarter profits. The company risks breaching conditions on its debt later this year, S&P said in its report published late on Wednesday.
However, Lucror Analytics said on Thursday Schmolz + Bickenbach is unlikely to lose access to its credit facilities
and banks have already agreed to temporarily increase covenant headroom this year. “We therefore expect S+B to maintain access to its credit facilities, and believe it would be able to obtain another waiver in an adverse scenario,” Lucror said.
A spokesman at Schmolz + Bickenbach declined to comment on the S&P report. “The report reflects exclusively the opinion of S&P based on their assumptions and calculations,” the spokesman said. “We do not comment on such opinions.”
S&P forecasts that Schmolz + Bickenbach’s adjusted debt will amount to more than six times earnings this year, warning that estimate may be revised higher if market conditions don’t improve. Schmolz + Bickenbach’s liquidity is “less than adequate”, S&P said. “The negative outlook reflects the possibility of a further downgrade if the market doesn’t recover in the next six to 12 months.”
By Oliver Telling and Katie Linsell