A global credit-rating agency has downgraded Gopher Resource — a move that experts described as a serious blow to the Tampa lead smelter.
The downgrade comes after the Tampa Bay Times revealed that Gopher had exposed hundreds of workers to extreme amounts of lead. The newsroom’s investigation published in March prompted federal regulators to descend on the plant.
Moody’s Investors Service cited the continuing federal inspection, as well as Gopher’s high debt levels and limited cash, as factors in its decision.
“The ongoing regulatory inspection of the Tampa plant and legal challenges could come at material cost to the company,” the agency wrote last week.
The credit assessment serves as a tool to help lenders and investors judge Gopher’s ability to make payments on debt.
Moody’s first deemed Gopher a high credit risk in 2018. The recent downgrade slid the company into the “very high credit risk” category.
Five business experts told the Times that the decision could make it harder — and more expensive — for Gopher to borrow.
“That’s a significant impact on the company moving forward,” said Omri Even-Tov, an assistant professor at the Haas School of Business at the University of California, Berkeley.
It could also affect existing lines of credit, said Erik Gordon, clinical assistant professor at the University of Michigan’s Ross School of Business.
Gopher is a privately-held company that has been owned by Energy Capital Partners, a New Jersey-based private equity firm, since 2018. At the time, Gopher announced plans to borrow $490 million, records show.
The company currently has a $40 million revolving credit line, of which roughly $18 million is available, according to the latest Moody’s rating.
Gopher did not respond to requests for comment about the downgrade.
Moody’s began its review of Gopher’s finances in mid-April after the Occupational Safety and Health Administration launched an inspection of the factory. S&P Global also placed Gopher on credit watch but has not yet issued an update.
Both Moody’s and S&P cited the OSHA probe and health and safety allegations against Gopher as grounds to reassess the company’s ratings.
OSHA has not said when it expects to wrap up its inquiry. The regulatory agency has maintained a presence at Gopher for months after a five-year period in which it failed to show up for any inspections or site visits.
OSHA declined to comment Tuesday.
Moody’s, in its announcement, also said Gopher’s ratings outlook was negative.
A lingering concern for the credit-rating agency is whether Gopher will need to pay any regulatory fines, make costly repairs or improvements, or get hit with hefty legal expenses from litigation. One former worker has filed suit against Gopher alleging dangerous conditions inside the factory resulted in his unwittingly carrying lead dust home and exposing his infant son.
The worker’s attorneys, including high-profile civil rights lawyer Benjamin Crump, have said they are representing more than 100 workers, hinting that more lawsuits are forthcoming.
Moody’s also noted that Gopher has continued to pay annual dividends, calling the decision “an aggressive policy considering the company’s risk profile.”
“They are saying it has not escaped Moody’s attention that the company is paying dividends while their credit risk is so high,” said Gordon, the University of Michigan professor.
Over the last year, Gopher has earned roughly $353 million in revenue, according to Moody’s.
The company took a financial hit in 2020, ceasing production for several weeks at its Tampa plant because of the economic impact of COVID-19.
Gopher operates the Tampa plant and another in Eagan, Minn., where it is headquartered. Only 10 such factories remain in the United States.
The company is a leader in the lead market, where demand is expected to increase over the next year and outpace recycling capacity, Moody’s said. Workers extract lead from used car batteries and melt it in furnaces to create new blocks of metal to sell to companies like battery and ammunition manufacturers.
The Times investigation found the majority of workers at Gopher’s Tampa plant from 2014 to 2018 had enough lead in their blood to put them at risk of increased blood pressure, kidney dysfunction or cardiovascular disease.
The company knew dangerous levels of lead dust were accumulating inside the factory, the Times found. But it let mechanical problems linger and failed to provide workers with adequate protection. The Times also found that children of factory workers were being exposed to lead dust that factory employees unknowingly carried home. The suspected “take-home” poisoning has formed the backbone of the first lawsuit filed against the company since the Times investigation ran.
This story is part of a collaboration with FRONTLINE, the PBS series, through its Local Journalism Initiative, which is funded by the John S. and James L. Knight Foundation and the Corporation for Public Broadcasting.