Fitch Downgrades Kennametal Issuer Default Rating

CHICAGO (AP) — Fitch Ratings downgraded Kennametal Inc.'s long-term issuer default rating on Friday, citing the company's declining sales and margins amid the global economic crisis.

Fitch lowered Kennametal's issuer default rating, and its senior unsecured bank facilities and senior unsecured debt ratings, to "BBB-" from "BBB." The rating outlook remains negative.

The agency said the downgrade of Kennametal, a maker of metal-cutting tools and highway construction equipment based in Latrobe, Pa., reflects "the likelihood of weakening leverage and limited free cash flow through much of calendar 2009."

It noted that sales and margins have declined and a sharp slowdown among Kennametal's industrial customers contributed to much lower orders starting in November.

"It is unclear when demand could stabilize," Fitch said.

The elimination of costs due to restructuring charges eventually should offset some of the pressure on margins from lower volumes, according to the agency. It said Kennametal has sufficient liquidity to cope with near-term challenges.

Shares of Kennametal rose 52 cents, or 2.6 percent, to $20.53 in afternoon trading Friday.