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 RATES ICO, INC.'S SR. NOTE ISSUE B1 WITH POSITIVE OUTLOOK AND CONFIRMS CONV. PREF'S AT "b3"

29 May 1997
MOODY'S RATES ICO, INC.'S SR. NOTE ISSUE B1 WITH POSITIVE OUTLOOK AND CONFIRMS CONV. PREF'S AT "b3" New York, May 29, 1997 -- Moody's Investors Service assigned a B1 rating with positive outlook to ICO, Inc.'s proposed $100 million ten-year bullet senior unsecured notes, offered under SEC Rule 144A, and confirmed its "b3" rating on ICO's existing $32.5 million of convertible exchangeable preferred shares.
Offering proceeds will retire all domestic revolver outstandings, fund capital expenditures, and increase cash balances to over $80 million. The available cash will pre-fund ICO's intermediate term expansion strategy. Pro-forma for the offering, net debt will be under $30 million and net senior debt leverage will be low. Additionally, ICO's convertible exchangeable prefs appear to be embedded as near-equity for at least three to four years. ICO will not have room under restricted payments tests to exchange the prefs into subordinated notes during that time span. Finally, in light of relatively large pro-forma cash balances and ICO's active acquisition mode, the ratings incorporate a conservative view on successful investment of cash resources. ICO is a modestly-sized firm that is a significant distance away from the scale of operations necessary to ensure efficient funding, and viability during a 1980's style oil service depression. However, the trends are positive.
The positive outlook is assigned due to: favorable economic and technological fundamentals supporting growing demand for ICO's products and services and placing increased pricing power in ICO's hands; ICO's [1996] attainment of moderate risk diversification by entering the petrochemicals service business; and ICO's relatively large pro-forma cash balances and record of reasonably sound acquisitions. A surge in oil and gas drilling activity is progressing and average measured depth is increasing (tubular inspection services are typically billed by the foot). A surge in directional and horizontal drilling and steerable drilling systems alone, resulting increased torque on downhole tubulars, increases the standards for tubular integrity. Oil majors have generally announced aggressive five year drilling budgets. Moody's does not anticipate a sustained crude oil or natural gas price collapse. However, if a supply-driven crude price collapse occurred that negatively impacted drilling activity, the likely negative impact on ICO's oil service's business may be balanced by its petrochemicals business. Cheaper petrochemicals and plastics prices may spur increased petrochemicals consumption and demand for ICO's petrochemicals services.
The ratings are supported by favorable sector fundamentals: key oil service revenue drivers are ascendant, with growing active domestic on and offshore drilling and workover rig counts, increased measured drilling depths, and increased average complexity and discreet value of oil producer's drilling and workover well activity. This increases the demand for services like ICO's that reduce producers long-term operating costs, reduce risks of downhole failure, and prolong the lives of downhole assets. The drilling sector witnessed a 22% rise in rig activity since early 1996, up to 948 active rigs last week. During the same period, the active workover rig count increased roughly 8% from just under 1,280 rigs to just under 1,380 rigs. Rig activity is responding to a tight global supply/demand balance for crude, major oil companies' need to grow unit volumes and reduce costs, projected strong global demand for hydrocarbons, and technological advances that are substantially improving exploration, drilling, and development economics. ICO's oil service and petrochemicals divisions jointly benefit from current sustained growth in global demand for hydrocarbons and derivative products. Additional boosts to drilling activity stem from technological improvements in exploration, development, and production economics plus oil producers' intense focus on presenting strong unit volume growth profiles to the equity market.
We also note ICO's manageable gross debt levels; promising record of acquisitions in two consolidating industry sectors; reasonably specific and disciplined acquisition criteria; and a record of using mixes of cash and equity as acquisition currencies. Further support is gained by substantial pro-forma balance sheet flexibility to absorb acquisition mistakes, unforeseen costs of or delays in merger integration, and to fund significant expansion without incurring additional debt. Though future acquisition success is not factored into our rating, any incremental EBITDA would be accretive to bondholders, assuming that neither new debt was incurred nor unforeseen liabilities were subsequently encountered.
The ratings are constrained by ICO's modest size, both in absolute terms and relative specifically to Tuboscope Vetco (currently unrated), ICO's principal competitor in the oil service sector; ICO's rapid growth by acquisitions, the number of acquisitions to assimilate, and 1996-vintage of its entry into the petrochemicals processing sector; and the fact that both of its businesses would be hurt by a global decline in hydrocarbon demand. ICO's brief experience on the petrochemicals side, and the fact that ICO will aggressively pursue consolidation in that sector, also constrain the rating. The ratings are further constrained by the historically highly cyclical oil service and petrochemicals sectors, with the former often severely impacting both unit demand and pricing, and the latter principally severely impacting pricing. The effective subordination of the notes to ICO's $25 million secured borrowing base availability and domestic subsidiaries' trade creditors, as well as to foreign subsidiaries' working capital and trade creditors, further constrains the rating.
Maintenance of the ratings rests on management's use of proceeds, specifically acquisitions within current business lines and reasonable acquisition multiples. Moody's will assess management's skill in delivering accretive growth through its acquisition strategy and to navigate its businesses through inevitable cycles. We note that one-time write-offs, merger costs, amortisation of goodwill, and high levels of acquisition-inflated depreciation slow ICO's progress in establishing GAAP earnings and ROA track records and accumulating positive retained earnings. Given the competition for growth capital, we believe these factors can potentially narrow a growing firm's access to capital during times of general financial market distress.
The ratings are further supported by ICO's strong domestic niche position in a duopoly segment of the oil services industry, management's skill in generating six consecutive years of revenue and EBITDA growth, and six years of widening margins resulting from consolidation and increasing scale economies. ICO believes it has the majority of the domestic sucker rod inspection market and 30% to 40% of the tubular goods inspection and coatings business. ICO reports long-standing customer relationships with the international oil majors, steel, and chemical companies, including Amoco, Shell, Mobil, Exxon, Phillips, Quantum Chemical, Borealis, and U.S.Steel and recently won quality awards from Exxon and Union Carbide. Having qualified to serve major oil companies, ICO believes such oil services relationships will assist in winning contracts with the petrochemicals arms of those same firms. ICO recently signed chemicals distribution contracts and/or alliances with Exxon and Borealis.
Two key acquisitions, of a total of 16 completed since 1992, gave ICO relative critical mass in oil services and petrochemicals processing. In 1992, the company bought Baker Hughes' domestic Tubular Services business; in 1996, ICO bought Wedco Technology, Inc., whose principal business is grinding/size reduction of plastic pellets into plastic powders and related processing services. Additional acquisitions intensified ICO's position in oilfield services and in processing services for the petrochemicals/plastics sector through a series of small acquisitions of regional/niche firms hubbed around major customers. The petrochemicals/plastics processing business serves clients downstream from their commodity petrochemicals and plastic pellet manufacturing units. Management has completed 9 oil services acquisitions and 6 petrochemicals/plastics acquisitions. In 1992, Baker-Hughes also sold its international tubulars inspection business to Tuboscope, now ICO's principal competitor worldwide.
In oilfield services, ICO provides electromagnetic and ultrasonic tubulars inspection services and corrosion protection services for tubular goods and sucker rods that reduce producer's operating costs and prolong the life of increasingly sophisticated/valuable downhole production assets. ICO inspects new tubular goods for flaws before being placed downhole, existing tubular goods and sucker rods are inspected and reconditioned during well workovers, and new and used tubulars and sucker rods are treated with corrosion prevention coatings. Deeper and more sophisticated wells, drilled into prolific but harsher subsurface environments, lead producers to invest in inspection and corrosion protection services rather than risk expensive premature remedial action after completion. Inspection can avoid future catastrophic pipe and well failure for only some $20,000-plus per well. Tubular coatings extend the life of tubulars by a factor of some 4X, at a cost of $20,000-plus per well, and can increase flow rates of high-paraffin wells by reducing paraffin build-up on tubular sidewalls.
In the petrochemicals/plastics sector, ICO serves two basic functions. Both on contract and as principal, ICO grinds (reduces) major petrochemical firms' plastic resin pellet production to meet downstream customers' specific size and quality requirements. This enables large capital intensive chemical majors to focus on producing standard products in large batches and at maximum output and efficiency. Downstream customization can be handled by ICO. ICO also manufactures concentrates that are added to plastic resins to alter color, texture, and other properties of final products.
Pro-forma for the bond issue, approximately $113 million of gross debt and $128 million of equity support approximately $85 million of cash and approximately $270 million of assets. Pro-forma for recent acquisitions, management cites normalized FYE 9/30/96 EBITDA of $21 million and $12.3 million of pro-forma six-months 3/31/97 EBITDA. Actual FYE9/30/96 EBITDA was $14 million, prior to one-time write-offs. Pro-forma FY 1997 EBITDA/Gross Interest Expense exceeds 3x and EBITDA/average Net Interest Expense exceeds 4x. Pro-forma Gross Debt/EBITDA is would be below 4.0x and Net Debt/EBITDA would be 1.0x. Similarly, pro-forma Gross Total Debt/Cap would be 40% while Net Debt/Cap would be a low 10%. The company will have over $80 million in cash to grow the business prior to incurring additional debt. While ICO's gross margins appear to be comparable to its prime oil services competitor, Tuboscope Vetco, ICO's EBITDA, EBIT, and pre-tax margins are less than one-half of Tuboscope's margins. This may partially be due to ICO's significantly smaller size relative to Tuboscope, to ICO's higher proportion of acquisition-led growth, and to ICO's management team assembled in anticipation of substantial global growth and acquisition activity over which those cost would be spread.
ICO is a public firm headquartered in Houston, Texas pursuing consolidation in the international petrochemicals processing and international oil services inspection and protective coatings sectors.
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