JW Aluminum Continuous Cast Co.

The stable outlook reflects our view that JW Aluminum's operational performance will remain steady given solid volumes and favorable pricing, albeit completing its additional capacity project on time and on budget is a key risk factor. We expect adjusted debt to EBITDA in the mid-5x area and EBITDA interest coverage of about 2x over the next 12 months. We could lower our ratings on JW Aluminum over the next 12 months if credit metrics deteriorate because of weaker-than-expected volumes and conversion margins, or cost overruns related to its Boilermaker project. Specifically, we could lower our rating if the company produced EBITDA interest coverage approaching 1x as this would likely represent an unsustainable capital structure. Although an upgrade is unlikely over

...We believe the debt associated with JW Aluminum's expansion of its flat rolled aluminum operations will lead to persisting weak credit metrics over the next two years. We expect the company will generate debt leverage above 5x until the Boilermaker project's first incremental cash flows start materializing in mid-2020. There are execution risks given the materiality of this project relative to JW Aluminum's size as cost overruns or delays could weaken credit measures and liquidity. So far, phase 1 of the expansion is on time and on budget for mid-2020 delivery while the phase 2 will be completed in 2022. JW Aluminum is exposed to cyclical end markets and metal price variations. We estimate a 10% decline in volumes sold combined with a 10% contraction in its total spread would result in EBITDA interest coverage near 1.3x and debt leverage of more than 7x. We believe this scenario could result from competitive pressures reducing the company's ability to pass through conversion charges and...

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