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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":" March 20 – Overview — The EUR152.9 million notes issued by South Africa-based recycler The New Reclamation Group Pty Ltd. (Reclam) are now less than 12 months from their maturity date of Feb. 1, 2013. — We see a risk that the company may not be able to secure financing on time, either by issuing […]<\/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-9141","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\/9141","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=9141"}],"version-history":[{"count":0,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/posts\/9141\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/media?parent=9141"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/categories?post=9141"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.myza.co.za\/press\/wp-json\/wp\/v2\/tags?post=9141"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}March 20 - Overview\t\n -- The EUR152.9 million notes issued by South Africa-based recycler The New\t\nReclamation Group Pty Ltd. (Reclam) are now less than 12 months from their \t\nmaturity date of Feb. 1, 2013.\t\n -- We see a risk that the company may not be able to secure financing on \t\ntime, either by issuing new debt and seeking parental support or by an equity \t\ninjection, and we have revised the company's liquidity assessment downward to \t\n\"weak\". \t\n -- We are therefore placing our 'CCC+' long-term corporate credit and \t\nsenior unsecured debt ratings on Reclam on CreditWatch negative. \t\n -- The CreditWatch placement reflects the risk of a downgrade if Reclam \t\nfails to finalize a clear refinancing plan. We aim to resolve the CreditWatch \t\nplacement within the next two to three months.\t\n\t\nRating Action\t\nOn March 20, 2012, Standard Poor's Ratings Services placed on CreditWatch \t\nnegative its 'CCC+' long-term corporate credit and senior unsecured debt \t\nratings on south Africa-based recycler New Reclamation Group (Reclam). \t\n\t\nRationale\t\nThe CreditWatch placement reflects the uncertainty around how the company will \t\nrefinance its EUR152.9 million (South African rand 1.5 billion) notes due \t\non Feb. 1, 2013. In our view, the refinancing risk is elevated by the notes' \t\nexposure to foreign exchange risk and by Reclam's high leverage, exacerbated \t\nby continued weak results from the recycling operations. Furthermore, we have \t\na lack of insight into the parent's ability and willingness to support the \t\nrefinancing. We have revised our assessment of the company's liquidity \t\ndownward to \"weak.\"\t\n\t\nIn financial 2011 (ended June 30, 2011), Reclam's scrap recycling volume \t\ndecreased by 6%, which, together with higher costs of sales, translated into a \t\n25% fall in EBITDA to ZAR300 million. This negative trend continued in the six \t\nmonths to Dec. 31, 2011, with EBITDA of ZAR108 million. We also see that \t\ncompetition has increased on the back of the ability of ArcelorMittal S.A. (a \t\nsubsidiary of Luxembourg-registered steel group ArcelorMittal \t\n ) to expand its scrap recycling business. In addition, the \t\nrecent drop in iron ore and coking coal prices--while scrap prices remain \t\nstable--may shift steel production to blast furnace from electric arc furnace \t\n(EAF), which could negatively affect Reclam as its scrap goes to EAF. This, in \t\nour view, could lead to greater steel imports to South Africa and, \t\naccordingly, pressure on Reclam's profits. \t\n\t\nOn the positive side, Reclam has seen increased profits from its diamond \t\nbusiness (Grandwell; 50.01%) in Zimbabwe, although country risk remains high. \t\nThe recent approval of Reclam's diamond mines in Zimbabwe by the Kimberly \t\nProcess (an initiative to prevent the trade of \"blood diamonds\") and upgrade \t\nof the processing plant there may also boost profits. In our opinion, this \t\ncould allow Grandwell to pay dividends and may help the company meet the large \t\nmaturity next year (until December 2011; Reclam received ZAR155 million after \t\nstarting operations in 2009). \t\n\t\nWe believe that a possible solution to Reclam's refinancing issue would \t\nrequire substantial support from its parent, a partial debt refinancing, and \t\nsome free cash flow. We consider the parent to have a significant interest in \t\nthe diamond business. For example, the parent provided a shareholder loan of \t\nZAR313 million in the third-quarter of 2010, and it has high involvement in \t\noperations. Another incentive for the parent to support Reclam is the \t\npossibility that it would lose its stake in the diamond business if Reclam \t\ndefaults.\t\n\t\nLiquidity\t\nWe assess Reclam's liquidity as \"weak\" under our criteria. We estimate that \t\nthe ratio of sources to uses of liquidity will be above 1.2x in calendar 2012, \t\nbut that there will be a material deficit over the next 12 months as the \t\nEUR152.9 million notes are due in February 2013. The bilateral credit line also \t\nexpires in February 2013, and it is uncertain as to whether banks would extend \t\nit beyond that date.\t\n\t\nAssuming no future dividends from Grandwell, we project the following sources \t\nof liquidity as of Dec. 31, 2011:\t\n -- ZAR149 million cash, excluding ZAR11 million at Grandwell; \t\n -- ZAR184 million under Reclam's ZAR322 million bilateral credit line \t\nwith Nedbank Group Ltd. (BBBpi; unsolicited rating), which is available until \t\nFeb. 1, 2013;\t\n -- Cash flow from operations from the recycling division of about ZAR250 \t\nmillion until June 30, 2013; and\t\n -- No contribution from the diamonds division.\t\n\t\nWe project the following uses of liquidity as of Dec. 31, 2011:\t\n -- ZAR1,535 million (EUR152.9 million) notes due on Feb. 1, 2013;\t\n -- ZAR64 million of other long-term debt maturities, excluding a ZAR49 \t\nmillion shareholder loan, which is non-recourse to Reclam and will be paid \t\nusing funds from the diamond operations. \t\n -- ZAR120 million in capital expenditure (capex) until June 30, 2013, of \t\nwhich maintenance capex should be ZAR15million-ZAR20 million per year. \t\n -- No working capital outflow, assuming the preservation of the current \t\ntrade receivables program between Reclam and its parent, and the recent \t\nagreement with key customers extending the payment period. If these agreements \t\nare not upheld, Reclam would be required to invest more than ZAR150 million in \t\nworking capital. \t\n\t\nRecovery analysis\t\nThe senior unsecured debt rating on the EUR152.9 million (originally EUR253 \t\nmillion) callable notes due 2013 issued by Reclam is 'CCC+', the same level as \t\nthe corporate credit rating. The recovery rating on the notes is '4', \t\nindicating our expectation of average (30%-50%) recovery prospects for senior \t\nnoteholders in the event of a payment default.\t\n\t\nWe value the business, excluding the diamond-mining operations, partially on a \t\ngoing-concern basis and partially on a discrete asset valuation. The \t\ndistressed value is highly sensitive to the asset value. In the case of a \t\ndefault in an environment of low scrap prices, our recovery expectations could \t\nbe materially lower than our recovery rating range indicates, as we believe \t\nthat asset values substantially underpin recovery prospects. Recovery \t\nprospects could also be materially affected by the exchange rate at the time \t\nof any default.\t\n\t\nFor a full recovery analysis, see \"The New Reclamation Group Pty Ltd. Recovery \t\nRating Profile\" published on Nov. 14, 2011, on RatingsDirect on the Global \t\nCredit Portal. \t\n\t\nCreditWatch\t\nWe aim to resolve the CreditWatch placement within the next two to three \t\nmonths, after meeting with management and gaining further insight into the \t\ncompany's prospects of refinancing the notes in February 2013. \t\n\t\nA lack of a clear refinancing plan would likely result in us downgrading \t\nReclam by several notches.\t\n\t\nRelated Criteria And Research\t\n -- How Standard Poor's Uses Its 'CCC' Rating, Dec. 12, 2008\t\n -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 \t\n -- Key Credit Factors: Methodology And Assumptions On Risks In The Metals \t\nIndustry, June 22, 2009\t\n -- Methodology And Assumptions: Liquidity Descriptors For Global \t\nCorporate Issuers, Sept. 28, 2011\t\n -- Standard Poor's Revises Its Metal Price Assumptions For The Short \t\nTerm And for 2013 And Beyond, June 8, 2011\t\n\t\nRatings List\t\nRatings Affirmed; CreditWatch\/Outlook Action\t\n To From\t\nThe New Reclamation Group Pty Ltd.\t\n Corporate Credit Rating CCC+\/Watch Neg\/-- CCC+\/Negative\/--\t\n Senior Secured\t\n Local Currency CCC+ \/Watch Neg CCC+ \t\n Recovery Rating 4 4\t\n\t\nComplete ratings information is available to subscribers of RatingsDirect on \t\nthe Global Credit Portal at www.globalcreditportal.com. All ratings affected \t\nby this rating action can be found on Standard Poor's public Web site at \t\nwww.standardandpoors.com. Use the Ratings search box located in the left \t\ncolumn<\/pre>\n