Research Update: Carpenter Technology Corp. Downgraded To 'BB+' On Elevated Leverage, Outlook Stable

U.S. specialty metal alloys producer Carpenter Technology Corp.'s exposure to the hard-hit aerospace sector caused its debt leverage to spike during its fiscal year 2021 (ended June 30, 2021). We expect the company's S&P Global Ratings-adjusted debt to EBITDA to be 7x in fiscal year 2022 because its credit measures remain linked to the performance of the global aerospace industry, which could take a few years to recover from the severe disruptions stemming from the coronavirus pandemic. We lowered our issuer credit rating on Carpenter to 'BB+' from 'BBB-' because of its elevated earnings and leverage volatility and, partly, its greater end-market concentration relative to those of its peers. At the same time, we lowered our issue-level rating on the

...- U.S. specialty metal alloys producer Carpenter Technology Corp.'s exposure to the hard-hit aerospace sector caused its debt leverage to spike during its fiscal year 2021 (ended June 30, 2021). - We expect the company's S&P Global Ratings-adjusted debt to EBITDA to be 7x in fiscal year 2022 because its credit measures remain linked to the performance of the global aerospace industry, which could take a few years to recover from the severe disruptions stemming from the coronavirus pandemic. - We lowered our issuer credit rating on Carpenter to '##+' from '###-' because of its elevated earnings and leverage volatility and, partly, its greater end-market concentration relative to those of its peers. - At the same time, we lowered our issue-level rating on the company's unsecured debt to '##+' from '###-' and assigned our '3' recovery rating. The '3' recovery rating indicates our expectation for meaningful recovery (50%-70%; rounded estimate: 65%) in a default scenario. - The stable outlook...

Research Update