EUR 407.14 For Business Accounts Only

SGL CARBON - RATING REPORT

RATING RATIONALE

- We affirm our corporate rating on SGL Carbon (’SGL’) at B+.

- SGL has completed its far-reaching industrial restructuring embarked on in FY16. Indeed, it closed in two sepa-rate transactions, in October and November 2017, the complete disposal of its Performance Products segment. This had been impacted by a steep downturn in the graphite electrode business, which resulted in large negative free cashflow and very high leverage. The disposal yielded €460m in total net cash proceeds, leading to the early redemption of the €250m senior secured notes in 4Q17. The proceeds will also be used to repay the €240m convertible bond maturing later this month, effectively leaving SGL with its €167m 3.50% 2020 converti-ble bond. These actions cut net leverage to c. 1x compared to 5x at the end of 3Q17.

- Days after the closing of the disposals, SGL announced an agreement to acquire the remaining 50% stake of its JV with Benteler, Benteler SGL, and the acquisition of the remaining 49% of its JV with BMW, SGL ACF. Both transactions will increase SGL’s exposure to the automotive market and result in the full consolidation of these businesses, which were previously accounted for as equity for Benteler SGL and proportionally consolidated for SGL ACF. These acquisitions push net leverage on a pro forma basis back up to c. 2.x.