Bloomberg reported that Schmolz+Bickenbach AG dropped as much as 3.8%after Standard&Poor's said the Swiss maker of steel for the car industry risks breaking covenants on its debt next year.
S&P downgraded the steelmaker's credit rating to B-from B and said it may cut it again if Schmolz doesn't succeed in renegotiating covenant agreements on its debt.Earnings before interest,tax,depreciation and amortization in 2012 will probably drop about 53%.
Schmolz gets about a third of its sales from the European car industry,which is likely to suffer from a"protracted recession"in 2013,the ratings company said.European Union car sales fell to a 19 year low in the first 11 months of 2012,a report showed last week.
S&P said that"After obtaining covenant waiver approvals from the core banks for the rest of 2012,the company's management will likely take proactive actions to ensure covenant compliance next year.However,what approach the banks will take is difficult to foresee in the context of lingering industrial weakness in Europe and their own reduced risk appetite."
