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18 Feb 2011
Air Products long short-term commercial paper ratings raised to P-1
New York, February 18, 2011 -- Moody's Investors Service raised the long term senior unsecured
ratings of Air Products and Chemicals Inc. (Air Products) to A2
from A3 and raised the short-term commercial paper ratings to Prime-1
from Prime-2. These actions follow the termination of its
unsolicited cash offer for Airgas Inc and conclude the ratings review,
which was prompted by its February 2010 unsolicited takeover offer for
Airgas. The upgrade of the ratings to A2/Prime-1 are based
on the substantial improvement in the company financial metrics over the
past year and the expectation that it will be unable to undertake such
a large transaction in the future.
"The termination of the Airgas acquisition will allow the company
to focus on substantial opportunities for organic growth, while
allowing it to maintain a much higher return on assets," stated
John Rogers a Senior Vice President at Moody's, "Over
the past year Air Products' credit metrics have improved more than
we had expected and remain at levels that are clearly supportive of the
The A2 ratings reflect our expectations that Air Products will maintain
credit metrics that solidly support its A2 ratings (30% Retained
Cash Flow/Debt, Debt/EBITDA of 2.0-2.2x and
balance sheet debt below $4.5 billion in 2011). The
return of the ratings to the A2 level comes after a ruling by the Delaware
Chancery Court upholding Airgas' poison pill, and Air Products'
subsequent termination of its unsolicited takeover bid. We expect
the company will continue to benefit from the global economic recovery
and meaningfully improve its operating cash flows over the coming 12-18
months as capital spending remains elevated due to a substantial backlog
of new projects.
Air Products' A2 ratings are supported by the company's leading
position as a global supplier of industrial gases. The company
is amongst the largest suppliers of industrial gases globally and in North
America. Additionally, it is also a leading supplier of specialty
gases to the global electronics and semiconductor industry, as well
as largest supplier of hydrogen to the refinery industry. While
the company produced weaker than expected financial metrics in 2009 as
a result of the global downturn, metrics have improved substantially
over the past 18 months and are currently supportive of the A2 long term
ratings. However, elevated capital spending over the next
several years is expected to moderately reduce financial flexibility.
The A2 rating also take into consideration the expectation for moderate
share buy backs that will be funded primarily through operating cash flows.
Air Products' Prime-1 rating for commercial paper is supported
by the company's excellent liquidity. The company maintains
a commercial paper program of approximately $1.1 billion,
which is fully back-stopped by a $2 billion revolving credit
facility due in 2013. Its liquidity position is bolstered by our
expectations that the company will generate well over $2 billion
in gross cash flows over the next 12 months. In addition,
the company maintains sizeable cash balances ($247 million as of
December 31, 2010) and has no meaningful long term debt maturities.
Air Products and Chemicals, Inc.
..Senior unsecured issuer rating to A2 from A3
..Senior unsecured notes, euro-notes and debentures
to A2 from A3
..Senior unsecured rating for commercial paper to Prime-1
..Senior unsecured self registration to (P)A2 from (P)A3
..Preferred stock self registration to (P)Baa1 from (P)Baa2
..Senior unsecured revenue bonds supported by Air Products
to A2/Prime-1 from A3/Prime-2
The principal methodology used in this rating was Global Chemical Industry
published in January 2009.
Air Products and Chemicals, headquartered in Allentown, PA,
is a leading manufacturer and supplier of industrial, medical and
specialty gases and related equipment. Air Products had sales of
$9.2 billion in the LTM ending December 31, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
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
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Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Raises Air Products Senior Unsecured Ratings to A2; outlook stable
250 Greenwich Street
New York, NY 10007
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