TEXT-Moody's may cut Continental Alloys & Services

(The following statement was released by the ratings agency)

April 3 - Moody's Investors Service placed Continental Alloys & Services,
Inc's (Continental) ratings (B2 Corporate Family Rating and B3 Probability of
Default Rating) under review for possible downgrade following weaker than
expected operating performance and concerns that the company's performance
could continue to deteriorate, creating financial covenant compliance pressure.
Moody's is concerned that the company may not be able to comply with its
financial covenants in its bank credit facilities and may need to renegotiate
its covenants in order to maintain access to these facilities over the
near-term.

Continental's operating performance weakened in the fourth quarter of 2007
and thus far in 2008, primarily driven by weakness in the Gulf of Mexico and
Canada and by customer inventory overhangs. As a result, the company's EBITDA
levels have fallen below expectations and its cushion under its bank facility
financial covenants are fairly tight. Continental's fixed charge coverage ratio
appears particularly tight given the company's increased capital spending on a
new manufacturing facility in Malaysia, which is expected to be completed in
the second quarter of this year. Moody's notes that the company expects its
performance to improve in the second quarter of 2008 and that the recent
strength in commodity prices are supportive of increased oilfield service
activity levels. However, Moody's is concerned that the company's earnings
could continue to weaken, as Moody's believes that the Gulf of Mexico shelf has
faced a secular decline in rig activity. In addition, even with increased
energy sector activity levels, Continental could face pressured earnings and
profitability levels over the near-term due to the risk of continued inventory
overhangs and to a lesser extent the sale of its nickel products inventory at
lower margins.

During the review process, Moody's will focus on the company's ability to
maintain or build a healthy cushion of compliance (through covenant amendment
or otherwise) vis--vis its financial covenants and maintain adequate
liquidity, with particular focus on expected covenant compliance headroom over
the next several quarters. The review will also consider the company's ability
to achieve improved operating performance on the heels of weakness in the Gulf
of Mexico shelf and Canada, prevent material margin erosion, offset the risk of
certain customers increasing their use of regional sourcing in international
markets, generate incremental cash flow from its new facility in Malaysia, and
the potential for additional equity infusion.
Ratings placed under review for possible downgrade are as follows:
On Review for Possible Downgrade:
..Issuer: Continental Alloys & Services, Inc.
....Probability of Default Rating, Placed on Review for Possible Downgrade,
currently B3
....Corporate Family Rating, Placed on Review for Possible Downgrade, currently
B2
....Senior Secured Bank Credit Facility, Placed on Review for Possible
Downgrade, currently B2
Outlook Actions:
..Issuer: Continental Alloys & Services, Inc.
....Outlook, Changed To Rating Under Review From Stable

Continental Alloys & Services, Inc. is headquartered in Spring, Texas.
(New York Ratings Team)