London, 07 December 2012 -- Moody's Investors Service has today downgraded to Caa1 from B3 the corporate family rating (CFR) and probability of default rating (PDR) of Kerling plc. Concurrently, the rating agency has downgraded to Caa1 from B3 the ratings on Kerling's EUR 785 million of senior secured notes maturing in 2017, and EUR 75 million of senior secured loan notes maturing in 2016. The outlook on the ratings is negative.
"In addition to our ongoing negative outlook for Europe's cyclical polyvinyl chloride (PVC) product market, today's rating action also reflects Kerling's inability to improve profitability and to achieve credit metrics that we consider to be appropriate for the B3 rating," says Anthony Hill, a Moody's Vice President--Senior Analyst and lead analyst for Kerling.
Following Kerling's acquisition of Tessenderlo's European vinyl and chloralkali assets in the third-quarter of 2011, the harsh trading environment has continued to overwhelm the company's attempts to restore its credit metrics to appropriate levels. Moody's had previously expected that Kerling would have been able to decrease its leverage to around 5.5x debt/EBITDA on a Moody's-adjusted basis and maintain it at that level through 2013. However, as of the last twelve months (LTM) ending 30 September 2012, this ratio was 8.5x, and Moody's expects it to decrease to only around 7.5x by this fiscal year-end 31 December 2012, after taking into account the full contribution of Tessenderlo's European vinyl and chloralkali assets.
Also taking into account the full contribution of the acquired Tessenderlo's assets, Moody's expects that Kerling will post revenues of around EUR 3.0 billion at fiscal year-end 31 December 2012, which will represent around a 26% increase in revenues from fiscal year 2011 to 2012. However, the rating agency expects that adjusted EBITDA will decline by nearly 8.5% over the same period (EUR 191 million in 2011 compared with about EUR 175 million now expected for 2012). This significant reduction in profitability reflects the depressed demand for PVC in Europe, ongoing customer de-stocking, and the company's inability to adequately pass-through ethylene cost increases. Against this backdrop Moody's does not expect a material near-term decrease in the company's financial leverage.
Kerling's ratings reflect the company's (1) high adjusted financial leverage and low adjusted financial interest expense coverage; (2) limited product diversification and its exclusive European footprint and focus, confirmed by its acquisition of Tessenderlo's European vinyl and chloralkali assets. Nearly 90% of Kerling's sales are based in Europe, leaving the company highly exposed to the downside risks associated with the euro area sovereign crisis and slow economic growth.
More positively, Kerling's ratings continue to receive support from the company's backward integration into ethylene and its feedstock agreements with strategic suppliers and partners, including Ineos Group Holdings SA (B2 positive).
As of 30 September 2012, Kerling reported a EUR 77 million cash balance and approximately EUR 60 million in availability under its EUR 200 million securitisation facility. The company also reported an undrawn revolving credit facility (RCF) of EUR 40 million. Under Moody's base-case assumptions for profitability, maintenance capital expenditures and working capital movements in 2013, the rating agency projects that Kerling will not generate positive free cash flow. Despite Kerling's current cash level, Moody's ultimately views the company's liquidity profile as weak due to (1) ongoing pressure on profitability and cash generation; (2) shrinking availability under the company's securitisation facility; and (3) uncertainty about its ongoing ability to draw under the RCF.
The negative outlook reflects our concerns that Kerling's operational and financial performance will increasingly come under pressure in the coming quarters due to persisting weakness in its core European PVC market, which remains affected by structural overcapacity, given limited prospects for recovery in construction end-user markets, especially in Southern Europe. As a result, the outlook assumes that over the coming quarters the weakening trends in credit metrics will continue, with no major catalyst currently envisaged for a possible reversal of this trend in the near future.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Whilst Moody's does not anticipate positive rating pressure in the near term, this could occur in the event of a sustained improvement in the PVC market in Europe, as well as an improved EBITDA margin above 9%, stronger cash flow generation and a reversal in the leverage trend, with Moody's-adjusted debt/EBITDA declining to below 5.5x on a sustainable basis.
Moody's would consider downgrading the Caa1 ratings if there is continued deterioration in Kerling's operating performance from current levels, leading to (1) materially lower profitability on a sustained basis; (2) negative FCF generation and a weaker liquidity position; or (3) a Moody's-adjusted debt/EBITDA increasing to above 7.5x on a sustained basis.
Kerling is a leading PVC and caustic soda producer in Europe, with additional positions in salt, brine and sulphur chemicals. It was formed by Ineos Capital through a combination of the Hydro ASA polymers business acquired in 2009, Ineos Enterprises and Ineos ChlorVinyls. At the end of 2011, Kerling reported an audited consolidated turnover of approximately EUR 2.4 billion and EBITDA of EUR 193 million.
The principal methodology used in rating Kerling Plc 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.
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, 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.
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.
Anthony Hill Vice President - Senior 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.
Heute im Fokus
S&P droht Großbritannien mit Herabstufung. Annäherung im Tarifstreit um den öffentlichen Dienst. Moody's senkt Ausblick für MTU-Rating. Singapur wird neuer Großaktionär bei alstria. Eurokurs legt Höhenflug hing. Medivation lehnt Milliarden-Offerte von Sanofi ab. Ölpreisverfall lässt Exxon-Gewinn weiter einbrechen.
Das haben die Dax-Vorstände 2015 verdient
Diese Aktien sind auf den Kauflisten der Experten
Die schönsten Geldscheine der Welt