23.07.2012 17:49
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General Cable Corporation -- Moody's affirms General Cable's Ba3 CFR; lowers SGL rating to SGL-3; outlook negative

Approximately $1.1 billion of debt affected

New York, July 23, 2012 -- Moody's Investors Service affirmed General Cable Corp.'s Ba3 Corporate Family Rating and Ba3 Probability of Default Rating. In a related rating action, Moody's downgraded the company's speculative grade liquidity rating to SGL-3 from SGL-1 and lowered the ratings of the company's senior unsecured debt to B1 from Ba3. The rating outlook is negative.

The following ratings/assessments were affected by this action:

Corporate Family Rating affirmed at Ba3;

Probability of Default Rating affirmed at Ba3;

$10.6 mil. (originally $475 mil.) Sr. Unsec. Conv. Notes due 2012 lowered to B1 (LGD5, 72%) from Ba3 (LGD4, 50%);

$355.0 mil. Sr. Unsec. Conv. Notes due 2013 lowered to B1 (LGD5, 72%) from Ba3 (LGD4, 50%);

$125.0 mil. Sr. Unsec. Notes due 2015 lowered to B1 (LGD5, 72%) from Ba3 (LGD4, 50%);

$200.0 mil. Sr. Unsec. Notes due 2017 lowered to B1 (LGD5, 72%) from Ba3 (LGD4, 50%); and,

$429.5 mil. 4.5% Sr. Sub. Conv. Notes due 2029 affirmed at B2 (LGD6, 93%).

The speculative grade liquidity rating is downgraded to SGL-3 from SGL-1.

RATINGS RATIONALE

General Cable's Ba3 Corporate Family Rating incorporates our view that the company's business profile is a credit strength. Based on our view that revenues could approach $7.0 billion over the next 18 months and include the company's recently announced two acquisitions -- Alcan Cable, the wire and cable business of Rio Tinto plc, and majority interest in Procables S.A., General Cable is a very large company that sells across multiple regions. As a global manufacturer, slowdowns in any specific geographic region may be offset by strength in others. It derives slightly more than 60% of its revenues from outside of the U.S. These characteristics are indicative of investment grade ratings.

The downgrading of General Cable's speculative grade liquidity rating to SGL-3 from SGL-1 results from its looming maturities. The $355.0 mil. Sr. Conv. Notes due 2013 become current liabilities in November 2012. Until these Notes are refinanced, General Cable's revolving credit facility will mature in August 2013, further stressing the company's liquidity profile since we do not consider the revolver as a sound source of liquidity if it matures within a year. Also, General Cable is financing its two acquisitions mainly by drawing down about $215 million under its revolving credit facility. Availability on a pro forma basis at March 31, 2012 will approximate $300 million since it is increasing the size of the revolver to $600 million from $400 million. We view remaining availability as insufficient to pay off some of its Notes due 2013 and to meet potentially future liquidity needs. Additionally, we cash on hand is a limited source of liquidity to contend with its maturing debt. Slightly more than $400 million of cash on hand is overseas, of which about $100 million is in Venezuela and most likely untouchable. The remaining $300 million must be used for overseas operations and, if necessary, to payoff $170 million of debt classified as current portion of long-term debt at 1Q12. Further, the cash held by the company's non-U.S. subsidiaries would likely be subject to additional tax upon repatriation.

The change in the rating outlook to negative from stable reflects our concerns regarding the company's liquidity profile and credit metrics that are weak relative to the rating. General Cable will have about $955 million of committed credit facilities maturing in 2013 and $170 million of additional debt classified as CPLT, creating significant refinancing risks. We are also concerned that General Cable is funding its acquisitions with a liquidity facility that effectively matures in August 2013. Also, the company's credit metrics are weak for the current rating. We forecast General Cable's interest coverage to be around 2.3 times over the next 12 to 18 months and debt-to-EBITDA will likely be slightly less than 4.5 times at the end of our forward looking view (all ratios incorporate Moody's standard adjustments). Our estimates include the operations as well as the debt associated with the two recent acquisitions. These key credit metrics are at or close to those previously identified that would cause ratings pressures.

The lowering of General Cable's senior unsecured debt - Notes due 2012, Notes due 2013, Notes due 2015, and Notes due 2017 -- to B1 from Ba3 result from the increase in the company's senior secured revolving credit facility to $600 million from $400 million. Asset-based revolvers have very higher recovery rates, placing downward pressures on unsecured debt. Additionally, the large amount of 20-day trade payables, which have the highest recovery rates in the capital structure, and foreign trade payables and drawn lines of credit, which are commitments of General Cable's non-guarantor subsidiaries and are likely to be repaid from these subsidiaries' cash flows prior to cash being repatriated to the U.S., are providing downward pressures on the Notes ratings too.

A factor that might stress the ratings includes further erosion in General Cable's liquidity profile such that it has difficulty in extending its maturity profile. Adverse legal rulings that impair the company's liquidity could negatively impact the ratings as well. Also, the failure of the company to integrate the acquisitions or to improve its operating performance such that debt-to-EBITDA is sustained above 4.5 times or EBITA-to-interest expense remains below 3.0 times (all ratios incorporate Moody's adjustments) could pressure the rating.

Stabilization of the rating could occur if General Cable addresses its maturity profile. Also, the ability to generate meaningful earnings and significant levels of free cash flow that result in debt-to-EBITDA sustained below 4.5 times or EBITA-to-interest trending towards 3.5 times (all ratios incorporate Moody's adjustments) would support positive rating actions.

The principal methodology used in rating General Cable was the Global Manufacturing Industry Methodology published December in 2010. Other methodologies used include Loss Given Default for Speculative Grade Issuers in the US, Canada, and EMEA, published June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

General Cable Corporation, headquartered in Highland Heights, TN, is a global manufacturer of copper, aluminum and fiber optic and power cable products. Primary end markets served include electrical utility, electrical infrastructure, and construction. Revenues for the twelve months through March 30, 2012 totaled about $5.9 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Peter Doyle Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Brian Oak MD - Corporate Finance Corporate Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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