New York, November 02, 2010 -- Moody's Investors Service assigned a Ba3 rating to Jarden's proposed $250
million senior unsecured notes and downgraded the existing senior subordinated
notes rating to B2 from B1. At the same time, Moody's
affirmed all of Jarden's other ratings (Ba3 CFR and PDR, Ba1 sr.
secured credit facility and term loan, Ba3 senior unsecured notes,
and SGL 1 liquidity rating). The outlook remains stable.
Proceeds from the $250 million new senior unsecured notes are expected
to be used for general corporate purposes as permitted under the company's
credit agreement amendment. The credit agreement was amended to
provide the Company with the ability to issue up to $750 million
in senior notes to fund acquisitions rather than to prepay the credit
facilities. The Company has up to 24 months to use proceeds from
a senior notes offering for an acquisition or to make optional prepayments
of debt; otherwise, at the end of 24 months, a mandatory
prepayment will be required.
"The incremental debt has little impact on our overall credit view
of the company as the Ba3 rating incorporates our expectation of future
acquisitions and financial leverage is not materially increasing,"
said Kevin Cassidy, Senior Credit Officer at Moody's Investors Service.
"While we think Jarden has a strong liquidity profile even without
this additional cash, having another $243 million of cash
on the balance sheet can only help near term liquidity," Cassidy
The rating on the unsecured notes to was downgraded one notch to B2 from
B1 because of the change in the relative mix of Jarden's capital
structure caused by adding $250 million of senior notes.
The Ba3 corporate family rating reflects the company's significant and
increasing scale, its leading market position in various niche branded
consumer products, diverse product portfolio, expanding geographic
diversification and its good liquidity profile. The corporate family
rating also reflects the acquisitive nature of the company and its propensity
to increase shareholder returns despite having relatively high adjusted
financial leverage at over 5x. The rating is constrained by the
continuing uncertainty in discretionary consumer spending and weakness
in the global economy.
The stable outlook reflects Moody's view that Jarden will grow organically
between 3-5% in the near to mid- term while maintaining
EBITA margins of around 9% or better (currently 9.6%).
The outlook also assumes that the economic stresses in Europe do not materially
impact Mapa Spontex's or any other European business. The lack
of debt funded shareholder returns is also considered in the outlook as
is our expectation that financial leverage will be reduced to around 4.5x
to 5x by the end of 2010.
A downgrade is not likely in the near term. However, a material
debt funded acquisition or an unexpected significant shock to the economy
combined with the following credit metrics could prompt a downgrade:
1) financial leverage well over 6x with no hope of reducing it,
2) low single digit operating margins, 3) low single digit retained
cash flow/adjusted debt percentages or the repeated consumption of cash.
A more likely scenario in the near to mid-term would be a negative
outlook. This could be driven by a sudden shift in consumer spending
habits for moderately priced branded consumer goods, an acquisition
that does not make strategic sense or additional increases in financial
leverage without a committed use of the proceeds.
While a positive outlook is also unlikely in the near term, a significant
and unexpected increase in discretionary consumer spending could spur
a positive outlook. An upgrade could occur if Jarden moderates
its acquisition appetite and its credit metrics significantly improve
from their current levels. For example, adjusted financial
leverage, which is currently a little over 5x on a proforma basis,
would need to be well below 4x, EBITA margins, which are currently
under 10%, would need to be in the mid teens and retained
cash flow to net debt, which is currently around 15%,
would need to be around 20%.
$250 million Senior Unsecured Notes at Ba3 (LGD4, 50%);
Ratings downgraded/assessments revised:
$650 million senior subordinated notes to B2 (LGD5, 82%)
from B1 (LGD 5, 74%);
$472 million senior subordinated notes to B2 (LGD5, 82%)
from B1 (LGD 5, 74%) ;
Ratings affirmed / assessments revised:
Corporate family rating at Ba3;
Probability of default rating at Ba3;
$113 million term loan maturing January 2012 at Ba1 (LGD 2,
$358 million term loan due January 2015 at Ba1 (LGD 2, 17%);
$594 million term loan due January 2015 at Ba1 (LGD 2, 17%);
$150 million revolving credit facility due January 2015 at Ba1
(LGD 2, 17%);
$293 million senior unsecured notes at Ba3 (LGD 4, 50%);
Speculative grade liquidity rating at SGL 1.
Moody's subscribers can find further details in the Jarden Credit Opinion
published on Moodys.com.
The last rating action was on October 25, 2010, where Moody's
reassigned a Ba1 rating to Jarden's term loan that was not amended and
affirmed all other ratings.
The principal methodology used in rating Jarden was the Global Consumer
Durables rating methodology published in October 2010 and Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S.,
Canada and EMEA published in June 2009. Other methodologies and
factors that may have been considered in the process of rating this issuer
can also be found on Moody's website.
Jarden Corporation is a manufacturer and distributor of niche consumer
products used in and around the home. The company's primary segment
include Consumer Solutions (which distributes kitchen appliances,
and home vacuum packaging systems), Branded Consumables (which distributes
playing cards, arts and crafts, plastic cutlery and firelogs),
and Outdoor solutions (which distributes a variety of outdoor leisure
products under the K2, PureFishing, Coleman and Campingaz
brands). Headquartered in Rye, NY the company reported net
sales of approximately $5.7 billion for the twelve months
ended September 30, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service's information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
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
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Glenn B. Eckert
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Rates Jarden's New Senior Unsecured Notes Ba3; Sub Notes Downgraded to B2
250 Greenwich Street
New York, NY 10007