Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S ASSIGNS B1 RATING TO KERR GROUP, INC.'S PROPOSED $205MM SECURED CREDIT FACILITY; THE RATINGS OUTLOOK IS STABLE

22 Jul 2003
MOODY'S ASSIGNS B1 RATING TO KERR GROUP, INC.'S PROPOSED $205MM SECURED CREDIT FACILITY; THE RATINGS OUTLOOK IS STABLE Moody’s Investors Service assigned a B1 rating to the proposed $205 million secured credit facility of Kerr Group, Inc. (“Kerr”) the proceeds of which will be used to partially finance the approximately $133 million total purchase price to acquire Setco, Inc. (“Setco”) and Tubed Products, Inc. (“TPI”). The ratings are constrained by the execution and integration risks associated with acquiring two companies whose historical stand-alone top line growth is flat to declining and which require meaningful investment to turnaround their depressed margins and lackluster returns. The weak balance sheet pro-forma for the transactions having high financial leverage and no tangible equity further constrains the ratings. The stable ratings outlook reflects Moody’s expectation that the pro-forma combined company will maintain adequate financial flexibility throughout the intermediate term with no material variance in profitability and/or liquidity from Moody’s current expectations. This is the first time Moody’s rates the debt of this producer of specialty closures and containers for the pharmaceutical, health and personal care, food, beverage, vitamin, and nutritional markets.


Today’s rating assignments were as follows:


B1 $205 million secured credit facility ($30 million 5 year revolver; $175 million 7 year term loan)

B1 senior implied rating

B3 senior unsecured issuer rating

The ratings outlook is stable.


The ratings reflect the changes to Kerr’s business and financial profile pro-forma for the proposed transactions which will more than double its stand-alone revenue and EBIT and will modestly increase total financial leverage. Long product qualification and regulatory review periods for its products, as well as concentrations in the pro-forma customer base (combined company top ten accounts will represent approximately 34% of net revenue), are also reflected in the ratings. The ratings incorporate sizable capital investment needed to fuel organic growth, to improve efficiencies, and to support product innovations. In Moody’s opinion, capitalization is thin and secondary sources of liquidity appear to be limited given that assets are fully encumbered. With combined pro-forma revenue of approximately $343 million, Kerr is small relative to its competitors who have significantly larger and diversified operations.


More positively, the ratings reflect the combined company’s leading positions throughout its niche markets, its new product development pipeline, its proven ability to meet and consistently maintain compliance with federal regulatory requirements for product quality and safety, as well as its exclusive muti-year supply contracts covering the majority of pro-forma revenue. Despite less than optimal margins at the acquired companies, combined profitability appears to be satisfactory and free cash flow is expected to hover around 10% of total debt (excluding preferred stock). Management's proven ability to turnaround underperforming businesses as evidenced by the steady organic improvement in Kerr's stand-alone EBITDA margins from the mid-teens to the mid-twenties since 2000 provides comfort to the ratings.


In Moody’s opinion, pro-forma liquidity appears to be adequate with the expectation that net cash generated by operations should be sufficient to fund capital expenditures throughout the intermediate term. At closing, liquidity should benefit from close to full availability under the proposed $30 million revolver.


The stable ratings outlook reflects some tolerance within the ratings to absorb limited tightening of credit statistics during the intermediate term. The outlook expresses Moody’s expectation of scheduled reductions in term debt and little to no usage under the proposed $30 million revolver. The stability of the outlook is predicated upon no further acquisitions and/or no material ramp ups in capital spending outside of current expectations. Any negative deviation from Moody’s current run-rate financial expectations, which specifically include no erosion in pro-forma margins, EBITA return on assets, or liquidity position, would likely result in a negative ratings outlook or action. Significant and sustained improvement in combined margins, coverage of interest expense, and free cash flow generation along with bolstered equity could move the ratings outlook to positive.


Pro-forma for the proposed transactions at closing, financial leverage is high with debt to EBITA at approximately 6 times (approximately 3.3 times debt to EBITDA). Debt includes the proposed $40 million of privately held 12% subordinated notes, due 2011. Given Kerr’s growth strategy and focus on efficiency improvements, capital investment is likely to outpace depreciation during the next few years. EBITA covers interest expense approximately 2.4 times.


The B1 rating assigned to the proposed credit facility reflects its priority position in the capital structure as well as adequate collateral coverage. Notching above the senior implied rating of B1 is precluded given the dominance of senior secured debt in the pro-forma capital structure (approximately 81% of the total). Outstandings under the proposed facility are to be secured by a first priority perfected lien on all assets and stock of the borrower, Kerr, and substantially all present and future assets of the borrower and guarantors. Guarantees from all existing and future domestic subsidiaries support the facility. Financial covenants were not finalized at the time of Moody’s review. Covenants are expected to address maximum financial leverage, minimum coverage of interest expense, minimum fixed charge coverage, and maximum capital expenditures. Proposed annual term amortization of approximately 5% in year one is aggressive, in Moody's opinion, relative to pro-forma combined free cash flow.


In addition to partially financing the acquisitions, the proposed secured facility is intended to refinance existing debt of roughly $107 million; to fund working capital and general corporate needs; and to pay related expenses. Equity capital from Fremont Partners, the controlling shareholder of Kerr, in the form of $34 million convertible preferred stock with PIK dividends at 10% for six years, plus $40 million of privately held 12% subordinated notes, due 2011, are intended to complete the acquisition financing. Moody’s does not rate the preferred stock nor the subordinated debt.


Headquartered in Lancaster, Pennsylvania, Kerr Group, Inc. is a producer of specialty closures and containers for the pharmaceutical, healthcare and food and beverage markets. Pro-forma for the LTM period ended 6/30/03, the company generated revenue of $342 million and EBITDA of $65 million. On 6/26/03, Kerr signed the acquisition agreement to purchase the packaging division of McCormick & Co. for $132.5 million, including trade liabilities and an earnout. The packaging division acquired consists of two businesses Setco, Inc. and Tubed Products, Inc. Setco is a producer of plastic bottles for the food, vitamin and nutritional, personal care, automotive and household chemicals markets. TPI is a producer of plastic squeeze tubes for the personal care, pharmaceutical, dentifrice, food, household and chemicals markets.
No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE 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 OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR  PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

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.

MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

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 or in preparing its Publications.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY'S.

To the extent permitted by law, MOODY'S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER.

Moody's Investors Service, Inc., 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 Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service 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 "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY'S affiliate, Moody's Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody's Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). 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. MOODY'S credit rating is an opinion as to the creditworthiness of 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.

Additional terms for Japan only: Moody's Japan K.K. ("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. Moody's SF Japan K.K. ("MSFJ") is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization ("NRSRO"). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​​​​​
Moodys.com