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\t\t<\/span><\/p>\n <\/span><\/p>\n \n \t\t\u00a9 Thomson Reuters 2012 All rights reserved<\/p>\n","protected":false},"excerpt":{"rendered":" — The EUR152.9 million senior notes issued by South Africa-based recycler The New Reclamation Group Pty Ltd. (Reclam) are now less than eight months from their maturity date of Feb. 1, 2013. — We have limited visibility on the company’s plans to refinance the notes or on its ability to execute any refinancing plan. — […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","ngg_post_thumbnail":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[830,2370,183],"class_list":{"0":"post-11973","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-south-africa","7":"tag-news","8":"tag-reuters","9":"tag-south-africa-2","10":"entry"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/11973","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/comments?post=11973"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/11973\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=11973"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=11973"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=11973"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}-- The EUR152.9 million senior notes issued by South Africa-based recycler \nThe New Reclamation Group Pty Ltd. (Reclam) are now less than eight\nmonths from their maturity date of Feb. 1, 2013.\n -- We have limited visibility on the company's plans to refinance the \nnotes or on its ability to execute any refinancing plan. \n -- We are therefore lowering to 'CCC-' from 'CCC+' our long-term \ncorporate credit and senior debt ratings on Reclam. \n -- The negative outlook reflects our view of a possible default by Feb. \n1, 2013, if Reclam fails to refinance the senior notes. \n\n\nRating Action\nOn June 29, 2012, Standard Poor's Ratings Services lowered to 'CCC-' from \n'CCC+' its long-term corporate credit and senior debt ratings on South \nAfrica-based recycler New Reclamation Group Pty Ltd. (Reclam). At the same \ntime, we removed the ratings from CreditWatch, where we placed them with \nnegative implications on March 20, 2012. The outlook is negative. \n\nRationale\nThe downgrade reflects our view of the risk over Reclam's ability to refinance \nits EUR153 million (South African rand 1.6 billion) senior notes by Feb. \n1, 2013. A failure to refinance the notes would lead to default.\n\nCurrently, Reclam does not have sufficient liquidity sources to repay the \nnotes. Furthermore, at this stage, we have limited visibility on the company's \nplans to refinance the notes, its ability to execute any refinance plan, and \nnotably the ability of its parent (Reclamation Holdings (Pty) Ltd.; not rated) \nto support such refinancing. In our view, the refinancing risk is heightened \nby the notes' exposure to foreign exchange fluctuations and by Reclam's high \nleverage, which is itself exacerbated by ongoing weak results from the scrap \nrecycling operations. We also understand that the company's bank support is \nlimited. \n\nAs of March 31, 2012, Reclam's consolidated Standard Poor's-adjusted debt \nwas ZAR2.1 billion, comprising the ZAR1.6 billion senior notes and ZAR0.2 \nbillion of working capital finance debt. Of this total, ZAR1.8 billion is due \nin February 2013. As the senior secured notes are unhedged, the total \noutstanding amount can change materially because the functional currency is \nrand, while the company issued in euros. This could add another layer of debt \nand increase the risk of default. \n\nAs of March 31, 2012, Reclam had ZAR280 million on the balance sheet. Under \nour base-case credit scenario, we assume that Reclam's scrap recycling \nactivities will generate free operating cash flow of ZAR80 million in the 12 \nmonths to March 31, 2013, assuming funds from operations of about ZAR180 \nmillion and capital expenditure (capex) of ZAR80 million in the same period. \nWe therefore assess liquidity as \"weak,\" with a deficit of ZAR1.4 billion. \n\nWe believe that Reclam could seek liquidity from several sources to meet the \naforementioned funding gap. That said, the short period before the notes' \nmaturity and our limited visibility on the company's plans means that we view \nthe situation as highly volatile. In our opinion, the possible sources of \nliquidity include, among others: \n -- Further dividends from the diamond mining segment. \n -- New loans from South African banks against the recycling business. \n -- Shareholder support. We consider that Reclam's parent has a \nsignificant interest in the diamond business. For example, the parent provided \na shareholder loan of ZAR313 million in the third quarter of 2010, and it has \na high level of involvement in the diamond operations. Another incentive for \nthe parent to support Reclam is the possibility that it would lose its stake \nin the diamond business if Reclam defaults.\n\nLiquidity\nWe assess Reclam's liquidity as \"weak\" under our criteria. We estimate that \nthere will be a material deficit of liquidity over the 12 months to Feb. 1, \n2013, when the EUR152.9 million notes are due. A bilateral credit line with \nNedbank Group Ltd. (BBBpi; unsolicited rating) also expires in February 2013, \nand it is uncertain as to whether banks would extend it beyond that date. \n\nAssuming no future dividends from Reclam's subsidiary Grandwell Holdings Ltd. \n(Grandwell), we project the following sources of liquidity as of March 31, \n2012:\n -- ZAR280 million cash, excluding ZAR74 million at Grandwell;\n -- ZAR83 million under Reclam's ZAR322 million bilateral credit line, \nwhich is available until Feb. 1, 2013;\n -- Cash flow from operations from the recycling division of about ZAR180 \nmillion until March 31, 2013; and\n -- No contribution from the diamonds division.\n\nWe project the following uses of liquidity as of March 31, 2012:\n -- ZAR1,573 million (EUR152.9 million) notes due on Feb. 1, 2013;\n -- ZAR84 million of other long-term debt maturities, excluding a ZAR51 \nmillion shareholder loan, which is nonrecourse to Reclam and which it will pay \nusing funds from the diamond operations.\n -- ZAR80 million in capex until March 31, 2013, of which maintenance \ncapex should be ZAR15 million-ZAR20 million per year.\n -- No working capital outflow, assuming the preservation of the current \ntrade receivables program between Reclam and its parent, and the recent \nagreement with key customers to extend the payment period. If these agreements \nare not upheld, Reclam would be required to invest more than ZAR150 million in \nworking capital.\n\nAlthough Reclam may receive further dividends from the diamond business over \nthe coming quarters, we have limited visibility on the diamond operations and \non Reclam's ability to control dividends. In the 18 months to March 31, 2012, \nReclam received net dividends (after netting rights issues) of ZAR311 million. \nHowever, we consider that further dividends from the diamond business will not \nchange our current assessment of Reclam's \"weak\" liquidity. \n\nRecovery analysis\nThe issue rating on the EUR152.9 million callable senior notes due 2013 \n(originally EUR253 million) issued by Reclam is 'CCC-', the same level as the \ncorporate credit rating. The recovery rating on the notes is '4', indicating \nour expectation of average (30%-50%) recovery for noteholders in the event of \na payment default.\n\nWe value the business, excluding the diamond-mining operations, partially as a \ngoing concern and partially using a discrete asset valuation. The distressed \nvalue is highly sensitive to the asset value. In the case of a default in an \nenvironment of low scrap metal prices, recovery expectations could be \nmaterially lower than our recovery rating range indicates, as we believe that \nasset values substantially underpin recovery prospects. Recovery prospects \ncould also be materially affected by the exchange rate at the time of a \ndefault.\n\nFor our detailed recovery analysis, see \"The New Reclamation Group Pty Ltd. \nRecovery Rating Profile,\" published Nov. 14, 2011, on RatingsDirect on the \nGlobal Credit Portal. \n\nOutlook\nThe negative outlook reflects our view that Reclam could default by Feb. 1, \n2013, if it fails to repay or refinance the notes in full and on time. We \ncould also lower the rating if, over the coming months, Reclam asks the \nnoteholders to extend the maturity date and\/or restructure. \n\nRatings upside could result if a refinancing package allows Reclam to \nestablish a new capital structure such that the recycling division's cash \ncapabilities, together with the contribution from the diamond mining division, \nare able to service debt over time.\nRelated Criteria And Research\nAll articles listed below are available on RatingsDirect on the Global Credit \nPortal, unless otherwise stated.\n -- Methodology And Assumptions: Liquidity Descriptors For Global \nCorporate Issuers, Sept. 28, 2011\n -- Key Credit Factors: Methodology And Assumptions On Risks In The Metals \nIndustry, June 22, 2009\n -- How Standard Poor's Uses Its 'CCC' Rating, Dec. 12, 2008\n -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008\n -- The New Reclamation Group Pty Ltd. Recovery Rating Profile, Nov. 14, \n2011\nRatings List\nDowngraded; CreditWatch\/Outlook Action\n To From\nThe New Reclamation Group Pty Ltd.\n Corporate Credit Rating CCC-\/Negative\/-- CCC+\/Watch Neg\/--\n Senior Secured Debt CCC- CCC+\/Watch Neg\n Recovery Rating 4 4\n\nComplete ratings information is available to subscribers of RatingsDirect on \nthe Global Credit Portal at www.globalcreditportal.com. All ratings affected \nby this rating action can be found on Standard Poor's public Web site at \nwww.standardandpoors.com. Use the Ratings search box located in the left \ncolumn.<\/pre>\n