JFB Firth Rixson, Inc. -- Moody's assigns B3 to Firth Rixson; Outlook stable

New York, November 12, 2012 -- Moody's Investors Service has assigned a B3 corporate family rating to JFB Firth Rixson Inc. (Firth Rixson) and a Ba3 rating to its proposed $800 million senior secured credit facilities. Proceeds of the borrowings will refinance existing debt. The rating outlook is stable.

The refinancing being contemplated will occur concurrent with the issuance of $150 million holding company PIK notes (PIK Notes) with proceeds downstreamed to the borrowing group. Proceeds from the loan will pre-fund Firth Rixson's planned addition of isothermal forging capabilities in Savannah, GA and a third forging press at its Meadowhall, UK facility over the next two years.

The following ratings were assigned (subject to review of final documentation):

B3 corporate family rating;

B3 probability of default rating;

Ba3 (LGD2, 21%) to its proposed $120 million senior secured revolver due March 2017; and

Ba3 (LGD2, 21%) to its proposed $680 million senior secured term loan B due June 2017.

RATING RATIONALE

The B3 corporate rating reflects Firth Rixson's high financial leverage (7.5x including the sponsor-owned PIK notes; 6.25x excluding the PIK notes), execution risk associated with its growth capital spending plans and long lead-time before these projects have a meaningful earnings impact, exposure to the cyclicality of the commercial aviation market, which accounts for 70% of its sales, and intensive capital investment needs for suppliers serving this market.

Firth Rixson's rings and forgings have a good presence across all in-production wide and narrow-body engines and longstanding relationships with the major engine manufacturers (OEM). Ratings benefit from Moody's expectation that Firth Rixson's existing long term contractual arrangements, with the majority of its key OEM customers, positions it to benefit from large order books and increasing production by airframe builders. Moody's views Firth Rixson as a strong competitor within its niche product lines and expects its ongoing capital investments to position itself for growth both within the commercial aviation market and in adjacent products serving power generation, oil and gas, mining, defense, automotive and railway markets.

Moody's sees execution risks associated with the expansion projects around the timing of project completion, potential for cost overruns and satisfying customer product quality requirements, particularly with regard to its entrance into isothermal forging technology. However, both projects are supported by long term customer commitments and position the company to win business, with a focus on next generation engine platforms. Successful ramp-up of these projects could have positive ratings implications.

The stable outlook reflects Moody's expectation that industry fundamentals will remain supportive of top-line and earnings growth consistent with recent performance. However, high absolute debt levels, increases in PIK obligations and negative free cash flows temper near term deleveraging expectations despite the company's pre-funding of planned growth capex.

Moody's expects Firth Rixson to maintain a good liquidity profile for the twelve to eighteen months following the close of this transaction. Meaningful cash balances at close will support Firth Rixson's near term capital expenditure plans which will begin to subside in 2014, at which time Firth Rixson should begin to generate modest free cash flows. We expect minimal usage under the company's $120 million revolver. Net leverage, interest coverage and capital spending covenants are expected to be set with standard cushion to the company's operating plan.

The Ba2 rating on the revolver and term loan reflect their first lien security interest in assets of all material US and UK operating subsidiaries as well as both upstream and downstream guarantees. In addition, the ratings on the bank obligations benefit from the level of junior claims consisting of the unrated $425 million mezzanine notes due December 2017 and the unrated PIK notes due December 2017. The revolver and term loan B are expected to include restrictions on dividends to be used to repay PIK notes.

Ratings could be upgraded should the successful execution of its manufacturing expansion plans and growth in ongoing operations lead to debt-to-EBITDA being maintained well below 6.0x and the company began generating positive free cash flow. Conversely, a ratings downgrade could occur if incremental dollars are needed to complete the expansion plans or if plans are delayed. In addition, all-in leverage maintained above 6.5x for an extended period, coupled with a deterioration in covenant headroom and ongoing cash consumption could lead to a ratings downgrade.

The principal methodology used in rating Firth Rixson was the Global Aerospace and Defense Industry Methodology published in June 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Firth Rixson, headquartered in East Hartford, CT, is a global supplier of highly engineered rings, forgings and specialist medal products primarily to aerospace engine manufacturers. The company also manufacturers forged and metal products for manufacturers in power generation, oil and gas, mining, defense, automotive and railway markets. The company is majority owned by Oak Hill Capital Partners. Sales for the year ended September 30, 2012 were roughly $1 billion.

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Brian GrieserAsst Vice President - Analyst Corporate Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Michael J. Mulvaney 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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