MOODY'S ASSIGNS Aa1 LONG-TERM RATING TO KOCH INDUSTRIES
New York, September 21, 1995 -- Moody's Investors Service assigned a Aa1 long-term rating and Prime-1 short-term rating to Koch Industries, Inc., for its guaranteed $100 million Port of Corpus Christi Authority of Nueces County, Texas Solid Waste Disposal Revenue Bonds (Koch Refining Company Project), Taxable Series 1995, and a VMIG-1 rating for its guaranteed tax-exempt $11.7 million part of Corpus Christi Authority of Nueces County, Texas Pollution Control Revenue Refunding Bonds (Koch Refining Company Project), Series 1995. This is the first time Moody's has rated Koch Industries' long-term debt. Moody's rates Koch's direct and guaranteed commercial paper Prime-1.
The Aa1 rating is based on Koch's well-managed asset base and core business focus, its strong financial protection measures, and its conservative financial policies. Koch's mix of businesses generates strong asset returns and stable cash flows, notwithstanding business cycles and inherently volatile industry margins. For many years, the company has paid modest dividends, reinvesting most of its cash flow from operations in its core businesses. Consequently, the company's equity growth has been strong and its debt levels have been very low.
Koch's financial leverage has increased in recent years as a result of acquisitions, including the 1993 purchase of United Gas Pipe Line, and the expansion of short-term investment activities funded by commercial paper. However, the company's total debt remains relatively low and its liquidity is strong.
Moody's notes that the company is privately owned and controlled by the Koch family of Wichita, Kansas. Consequently, any major change in the company's stable share ownership could pose financial leverage risks in the longer-term. In addition, acquisition opportunities could also increase Koch's financial leverage. However, Moody's believes these risks are mitigated by the company's strategic plans, stable cash generation and equity formation, which should allow Koch to maintain strong financial returns and debt protection measures consistent with the Aa1 rating.
Koch Industries, Inc., based in Wichita, Kansas, is one of the largest privately held corporations in the United States. The company is involved in virtually all phases of the oil and gas industry, as well as in chemicals, chemical technology products, agriculture, hard minerals, real estate, and financial services.
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