GrafTech International Ltd.

The stable outlook reflects our expectation that GrafTech's credit metrics will remain steady as it benefits from favorable take-or-pay contracts and maintains its current financial policy. We expect stable operating performance to lead to adjusted debt to EBITDA of 2x-3x over the next 12 months. We could lower the rating if GrafTech's debt leverage rises significantly above 3x. This could be caused by a combination of weaker market conditions in which contract renewals pressure operating margins due to lower realized prices for several years. It could also stem from GrafTech pursuing additional debt-financed, shareholder-friendly activities. We could raise our rating on GrafTech if financial sponsor Brookfield Asset Management Inc. continues reducing its ownership and relinquishes control. We would also expect

...We expect credit metrics will continue to support the current rating over the next year. We expect S&P Global Ratings-adjusted leverage to remain at 2x-3x in 2021 as lower EBITDA is offset by recent debt reduction. GrafTech's S&P Global Ratings-adjusted EBITDA was approximately $1 billion just over one year ago. We now expect EBITDA of $650 million-$700 million in 2021. The decline in EBITDA is attributed to lower sales volumes and a lower spot price for graphite electrodes in 2020, which we expect will continue in 2021. However, offsetting the decline in EBITDA was GrafTech's repayment of approximately $400 million in debt in 2020 and an additional payment of $150 million on its senior secured term loan in February 2021. This reduced GrafTech's unadjusted outstanding debt to $1.3 billion from about $1.8 billion at the beginning of 2020. Its S&P Global Ratings-adjusted leverage was 2.3x as of Dec. 31, 2020. GrafTech's long-term contract agreements (LTAs) provide good earnings visibility...

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