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 DOWNGRADES CREDIT FACILITY OF FORMICA CORPORATION TO B1; CHANGES OUTLOOK TO NEGATIVE FROM STABLE

30 May 2000
MOODY'S DOWNGRADES CREDIT FACILITY OF FORMICA CORPORATION TO B1; CHANGES OUTLOOK TO NEGATIVE FROM STABLE Moody's Investors Service has downgraded the $342.2 million credit facility on Formica Corporation to B1 from Ba3 and assigned a B1 rating to a new $110 million term loan within the amended credit facility. Moody's also confirmed the B3 rating on Formica Corporation's $215 million senior subordinated notes due 2009 and the B2 issuer rating. The senior implied rating is confirmed at B1, but the rating outlook is changed to negative from stable.


The ratings reflect Formica's weaker than expected financial performance over the past few years, as well as its high leverage, and thin interest coverage. It also reflects Formica's vulnerability to extensive near-term integration risks (the acquisition of the surfacing division of Perstorp Surface Materials AB ("PSM") -its aggressive acquisition strategy - and to exchange rate exposure in its European and Asian operations. These factors, coupled with the company's vulnerability to cyclicality in the decorative surfacing products market, pose additional threats to the bottom line.


The negative outlook reflects the risk of continued deterioration of profitability in North America as the economy may be reaching its peak, the possibility of not achieving the expected cost savings from restructuring along with the competitive environment. If core operating profits do not start to improve and adequately cover interest there is a strong possibility a downgrade may occur in the near future.


Moody's ratings concerns are tempered by Formica's 87-year history, its strong global market position, broad brand awareness worldwide, and the positive efforts the current management team has made since returning to the company in April 1998. Formica's current management team proved its ability to weather tough times when, during the recession and slow recovery period from 1990 through 1994, it grew sales to $489 million from $437 million. EBITDA improved marginally during that period, to $71.4 million from $66.1 million. In addition, in the two years that the former management team has been back, they have improved EBITDA margins from 7.2% in 1997 to 10.8% at year-end 1999.


Also supporting the ratings are the company's significant investment of capital expenditures over the past four years, its global distribution network, and the diversification of its sales revenues, which flow from both the new construction and the repair and remodeling segments, as well as from both the residential and commercial markets. In addition, an $80 million equity infusion by the sponsors for the PSM transaction (DLJ Merchant Banking Partners II.L.P. and CVC Capital Partners, Limited) enhances the capital structure.


Formica has a senior secured credit agreement with DLJ Capital Funding, as syndication agent, for $342.2 million, expiring May 2004. The facility includes a $150 million revolver that includes four $5 million facilities with the UK, French, Canadian, and Spanish subsidiaries as borrowers, a $85 million amortizing term loan that is broken out among the US, UK, and Canadian subsidiaries at $35 million, $40 million, and $10 million, respectively (each priced at Libor plus 2.75%). In addition the credit facility is comprised of a new $110 amortizing term loan to be used to acquire PSM, (priced at Libor plus 3.50%).


The facility is secured by all property and assets (tangible and intangible) of Formica and its present and future domestic subsidiaries and 100% of the capital stock of Formica and its domestic subsidiaries, and 65% of the capital stock of non-U.S. subsidiaries of Formica (including PSM Holdco).


The downgrade of the $342.2 million bank facility rating to B1 from Ba3 reflects its increased amount of $140 million, its secured position, the collateral package supporting the facility which also takes into consideration that the banks have liens only on U.S. assets not on the foreign assets, and guarantees from all of Formica's existing and future subsidiaries. The B3 rating of the $215 million senior subordinated notes also reflects their contractual subordination to borrowings under the $342.2 million secured credit facility.


The PSM transaction, which is valued at approximately $190 million, including fees and expenses, is 6.2 times pro forma 1999 EBITDA of $30.7 million. The $30.7 million includes expected cost savings in initial restructuring of $12 million. On a pro forma basis, without the cost savings, the multiple is a high 10.2 times.


Formica is highly leveraged with the ratio of total debt to capitalization equaling 78% and debt-to-EBITDA is approximately 4.6 times. Moody's expects it will be difficult to reduce debt in the near-term. Including pro forma for the PSM and STEL acquisitions Formica's book equity is $141 million. After subtracting goodwill, however, it is a negative $61 million at December 31, 1999. Total debt as of December 31, 1999, was $501 million (excluding preferred of $240 million). Sales and total assets for twelve months were $833 million, and $943 million, respectively.


Formica is depending on the success of two cost-savings programs. The first program centers on an anticipated $25 million in cost savings to be generated over the next two years from Formica's acquisition of PSM. The acquisition brings Formica expanded market positions in Europe, Asia and South America.


The second program involves a restructuring of its domestic operations, initiated in the first quarter of 2000 from which Formica is anticipating significant cost savings, of more than $7 million. The program centers on headcount reductions from the closing of the Mt. Bethel, PA solid surfacing facility and rationalizing sales, manufacturing and administration.



The new management team has done a good job at getting the SG&A margin down to 25.3% as of December 31, 1999, from 29.4% as of December 31, 1998. The target level, however, is 24%, the level of the early 1990s.



Formica generated 36% of its sales outside of North America based on figures through December 1999, approximately flat with 1998; however all of its operating income came from Europe and Asia. The North American market continues to be very competitive. Gross profit margins have improved, on a year-over-year basis at December 31, 1999, to 28.4% from 27.7%. But competition, product mix and lower than planned pricing have contributed to a decline in profitability. In response to these pressures, Formica this year formulated an action plan that should improve mix and margins and has implemented price increases.



Formica retains significant brand awareness and leadership in the high pressure laminates (HPL) market. The worldwide HPL market is approximately $3 billion and Formica has a 22% market share. It is the largest producer of HPL in Europe, the second largest producer in North America next to Wilsonart (a subsidiary of Illinois Tool Works Inc.), and one of the largest producers in Asia.


HPL products are used in applications requiring surface durability including kitchen countertops, furniture, doors, and flooring. Formica's products are marketed under the Formica, Surell, and Fountainhead brand names through more than 7,500 locations worldwide by domestic and international independent distributors and dealers. The company also has its own sales force.


1999 sales by category were as follows: high pressure laminates 83%, solid surfacing 7%, and flooring 10%, broken down regionally with North America furnishing 64% of sales, followed by Europe with 24%, and Asia at 12%. In the broad class of residential versus commercial sales, in the United States, sales are split evenly. In Europe, commercial sales make up a larger percentage of total sales than residential sales do. Within both residential and commercial markets, repair and remodeling account for a larger percentage of sales than new markets do.


Formica Corporation, established in 1913 and headquartered in Cincinnati, Ohio, is one of the largest producers of decorative high pressure laminates ("HPL") in the world and a leading brand name in the decorative surfacing products market.

No Related Data.
© 2019 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 ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND 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 OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. 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. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. 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, 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 AND MOODY’S 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 OR MOODY’S 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.

CREDIT RATINGS AND MOODY’S 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 the Moody’s 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 OR 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 rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. 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 “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 rating, agreed to pay to MJKK or MSFJ (as applicable) for 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