IPSCO has established a $150 million unsecured revolver that is considered investment-grade debt even though the steelmaking and fabricating company is still deemed high-yield by the rating agencies. "I'm frustrated that we are viewed as a non-investment grade company by the rating agencies," said Vicki Avril, senior v.p. and cfo at Lisle-Ill.-based ISPCO. "But we are pleased that our banks have chosen to treat us like an investment-grade borrower."
The current revolver is led by TD Securities and J.P. Morgan. Other banks in the syndicate are ABN Amro, Bank of America, Bank of Nova Scotia, Bank of Montreal and Fifth Third Bank. "We selected the banks involved in the syndication through a combination of long-term involvement and what they could bring to the table," said Avril. She said the company has been working with Bank One for 43 years.
Last February, Standard & Poor's lowered their ratings on IPSCO's debt from BB+ to BB, citing past demand weakness for the company's core products. The agency downgraded IPSCO from investment grade in 2002. The company responded to the most recent downgrade by noting that the change was based on past results when difficult markets coincided with peak building. According to a company release, IPSCO's market position "has never been stronger" and its recently expanded steelworks were performing exceptionally well and generating positive free cash flows. The Moody's Investors Service rating could not be determined and officials from both agencies did not return calls.
Sales for the third quarter were up 92%, setting a new company record at $641.9 million. Economic gains are a product of increased demand for plate steel and oil and gas tubular products in North America. The new three-year, $150 million revolver replaces a $200 million revolver that was set to expire in March 2005. "Additional cash flow and strong operating results allowed us to cut back on debt," noted Avril. "But it is typical for us to keep a standby credit facility." Due to strong cash flow IPSCO is considering share repurchases, further debt retirement and capital investment opportunities.