Moody's issues provisional ratings in advance of the final sale of securities and these reflect Moody's credit opinion regarding the transaction only. Upon a conclusive review of the final documentation Moody's will endeavor to assign definitive ratings. A definitive rating may differ from a provisional rating.
RATINGS RATIONALE
Moody's decision to assign a (P)Caa1 speculative-grade rating to Perstop reflects the combination of strengths and weaknesses that characterise the company's creditworthiness. Perstorp has a strong position as an established independent player in the niche chemical markets for Polyols and Oxo intermediates, and benefits from an integrated business model that underpins solid margins. These strengths are balanced by (1) a degree of concentration in the company's operating capacity, with facilities at Stenungsund and Perstorp; (2) its exposure to cyclical customer industries; as well as (3) challenges from volatile feedstock prices, despite the company's track record of passing on price variations. Importantly, the rating also reflects Perstorp's high leverage following the refinancing, including a Mezzanine layer that accrues non-cash interest to existing debt levels. Moody's believes that Perstop's limited free cash flow generation offers only modest deleveraging opportunities and highlights the need for continued profit growth in a challenging macroeconomic operating environment.
Perstorp enjoys global leading positions in several niche markets, including a number of its main products such as Penta, TMP and Capa, which together act as key contribution margin drivers. Many of the company's other activities, such as its Oxo division in Europe and Neo production, are among the top three (regional) players in terms of capacity respectively. In addition, Perstorp operates an integrated production system that allows for a flexible and efficient production process and the ability to optimise product output mix. Together with its longstanding relationships with suppliers and customers, Moody's views these considerations as key strengths of Perstorp's business model that allow for solid Ebitda margin generation.
Perstorp's products are mainly used for coating/resin and plasticiser applications across a range of industries that include construction, industrial, automotive and consumer goods. The cyclicality of these end markets provides for exposure to general economic activity in the regions in which Perstop operates. While Moody's particularly notes the currently challenging conditions in automotive and construction markets (including coatings), the rating agency derives a degree of comfort from the fact that around half of Perstop's construction exposure is geared towards renovation and maintenance rather than new build.
Perstorp operates eight production sites across Europe, one in Asia and one in America. Nevertheless, the Stenungsund facility in Sweden is the sole producer of Oxo intermediates, which account for a substantial part of revenue and profits. In addition, it also supplies Oxo intermediates to the Perstorp site as input for the production of a number of other products including Penta, Neo and TMP. Perstorp has the largest capacity for these products within the company which, together with the Oxo intermediates, account for the majority of revenue and contribution margin. Moody's notes that the degree of production concentration introduces some operational risk but also recognises the company's good operating track record.
Perstop's (P)Caa1 rating is also informed by its exposure to raw material prices. The company's operations require largely oil- and natural-gas-based raw materials, which experience significant price volatility over time. The supply contracts largely allow for pass-through of raw material price changes through pricing formulas or European contract prices. While contracts with customers have more limited built-in flexibility for raw material price changes, they are generally renegotiated on a monthly basis in the US and Asia, and on a quarterly basis in Europe. However, the company has also demonstrated a track record of contribution margin sustainability and Moody's recognises the company's efforts to establish reduced lead times in its European business.
Moody's also considers the capital structure of the company to be highly leveraged. While the potential sale of the minority stake in VENCOREX could provide for an additional deleveraging opportunity over time, the mezzanine instrument will accrue a considerable amount of interest every year which, together with the absence of amortizing debt offers limited opportunities to deleverage from internally generated cash flows. Combining these factors, the company will need to show continued Ebitda growth to support its capital structure. In this context, Moody's positively recognises the growth opportunities, particularly those stemming from the capacity expansions for Capa at its Warrington site and Neo at its Zibo facility together with a number of additional initiatives. However, the current challenges in a number of the company's more cyclical end markets may, in Moody's opinion, pressure Perstop's near-term growth potential. An additional element of uncertainty arises from currency exposure to the euro and US dollar.
The (P)B2 rating on the Senior Secured First Lien Notes reflects their priority ranking ahead of the Senior Secured Second Lien Notes and Mezzanine facility, as outlined in the intercreditor agreement. The (P)Caa2 rating for the Senior Secured Second Lien Notes reflects the relatively large amount of first priority debt. Moody's notes that the revolving credit facility (unrated) ranks ahead of all notes with regard to priority of payment according to the intercreditor agreement.
Moody's views Perstorp's near-term liquidity profile as adequate. As of June 2012 pro-forma for the transaction, the company will have SEK739 million in cash and SEK350 million available under the undrawn revolving facility due in February 2017. In combination with operating cash flows, this should be sufficient to compensate for swings in working capital and fund maintenance capex. The next debt maturity will be in February 2017 when the revolving facility expires. Moody's also expects Perstorp to invest in growth projects through a mix of reinvested operating cash flows and potentially additional shareholder funding, which could weight on free cash flow generation over coming years. Moody's assumes that the company will maintain full flexibility in determining the pace of the investments depending on operating cash flow generation.
The stable outlook incorporates Moody's expectation that the company will maintain an adequate liquidity profile.
WHAT COULD MOVE THE RATING UP/DOWN
Positive pressure on the rating may occur if the company successfully executes on its growth plans, resulting in growing contribution margins and adjusted Debt/Ebitda below 5.5x, together with sustained free cash flow generation while maintaining solid liquidity.
Conversely, negative pressure could develop if Ebitda growth cannot compensate for the growing Mezzanine debt, as this would translate into a negative trajectory for adjusted Debt/Ebitda in 2013 and beyond. In addition, any concerns over liquidity would pressure the rating.
The principal methodology used in rating Perstorp Holding AB was the Global Chemical Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Headquartered in Perstorp, Sweden, Perstorp Holding AB, is a chemical company mainly producing Polyols and Oxo intermediates that are used in a variety of products, including resins, coatings and plasticisers for various end markets. The company is owned by funds managed by private equity firm PAI partners SAS (86%) and management (14%). For the year ending December 2011, Perstorp reported SEK11.3 billion in revenues and Ebitda of SEK1.5 billion.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
The rated entity has received an Indicative Assessment Service within the last two years preceding the credit rating action.
Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Tobias Wagner Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Chetan Modi MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ("MIS") AND ITS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY'S ("MOODY'S PUBLICATIONS") MAY INCLUDE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY'S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY'S OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS AND MOODY'S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY'S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY'S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY'S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED,DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided "AS IS" without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY'S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error negligent or otherwise or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.
MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."
Any publication into Australia of this document is by MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657, which holds Australian Financial Services License no. 336969. This document is intended to be provided only to "wholesale clients" within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY'S that you are, or are accessing the document as a representative of, a "wholesale client" and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to "retail clients" within the meaning of section 761G of the Corporations Act 2001.
Notwithstanding the foregoing, credit ratings assigned on and after October 1, 2010 by Moody's Japan K.K. ("MJKK") are MJKK's current opinions of the relative future credit risk of entities, credit commitments, or debt or debt-like securities. In such a case, "MIS" in the foregoing statements shall be deemed to be replaced with "MJKK". MJKK is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly owned by Moody's Overseas Holdings Inc., a wholly-owned subsidiary of MCO.
This credit rating is an opinion as to the creditworthiness or a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be dangerous for retail investors to make any investment decision based on this credit rating. If in doubt you should contact your financial or other professional adviser.
ETF-Sparplan
Oskar ist der einfache und intelligente ETF-Sparplan. Er übernimmt die ETF-Auswahl, ist steuersmart, transparent und kostengünstig.