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I AGREE
14 Mar 2011
$575 million of new rated debt affected
New York, March 14, 2011 -- Moody's Investors Service assigned a Ba3 Corporate Family Rating (CFR)
to Indigold Carbon (Netherlands) BV (Indigold Carbon) and Ba3 ratings
to its proposed $75 million Revolving Credit Facility due 2016,
$175 million Term Loan A due 2016, and $325 million
Term Loan B due 2018. The proceeds from the new debt will partially
finance the acquisition of Columbian Chemicals Acquisition, LLC
(Columbian Chemicals) by the Aditya Birla Group (Birla) and repay Columbian
Chemicals existing debt. The revolving credit facility is not expected
to be utilized upon completion of the acquisition, which is expected
to occur in mid 2011 after the necessary regulatory approvals are secured.
The outlook is stable. The following summarizes the ratings activity:
Ratings assigned:
Indigold Carbon (Netherlands) BV
Corporate Family Rating -- Ba3
Probability of Default Rating -- Ba3
Outlook -- Stable
Indigold Carbon USA, Inc. & other borrowers
$75mm sr sec revolving credit facilities due 2016 -- Ba3 (LGD3,
42%)
$175mm sr sec term loan A due 2016 -- Ba3 (LGD3, 42%)
$325mm sr sec term loan B due 2018 -- Ba3 (LGD3, 42%)
Outlook -- Stable
Ratings affirmed:
Columbian Chemicals Acquisition, LLC
Corporate Family Rating -- Ba3*
Probability of Default Rating -- Ba3*
$75mm sr sec revolving credit facilities due 2015 -- Ba3 (LGD3,
42%) from (LGD3, 46%)*
$300mm sr sec term loan A due 2015 -- Ba3 (LGD3, 42%)
from (LGD3, 46%)*
Outlook -- Stable
*Columbian Chemicals' ratings to be withdrawn upon the completion
of the refinancing.
RATINGS RATIONALE
The Ba3 CFR rating is supported by expectations for strong performance
in 2011 as the industry continues to operate at high capacity utilization
rates, the stable nature of the carbon black business (relative
to other commodity chemical businesses), the company's strong
market positions as one of the top three global producers, long-term
stable customer relationships, moderate global demand growth,
and geographic diversity with operations in all major regions.
There is the potential for synergies to contribute to Columbian Chemicals'
and Birla's profitability (the combined companies will be the largest
producer of carbon black globally), however we note that the majority
of the two companies' businesses have little geographic overlap,
except in Europe, and the companies will be operated as separate
entities. Indigold Carbon's leverage is expected to be 4.0x
(as of December 31, 2010, pro forma for the proposed financing
and inclusive of Moody's standard analytical adjustments), up from
Columbian Chemicals' actual leverage of 2.6x as to December
31, 2010, however the company is expected to de-lever
steadily. Pressuring the ratings are the limited product diversity
(carbon black of various grades), commodity nature of the majority
of the company's carbon black business, meaningful customer
concentration, and exposure to energy and petroleum-based
feedstock costs.
The stable outlook reflects our expectation that the carbon black market
will continue to grow at GDP-like rates, the company will
maintain its margins despite potential raw material cost pressure and
will generate positive free cash flow. Currently, upside
to the rating is limited due to the size of the company (annual revenues
of approximately $1 billion), the commodity nature of the
majority of its products, but a positive outlook could be considered
should the company be able to significantly reduce leverage after the
acquisition. Any decline in EBITDA margins or unexpected increases
in leverage could cause a change in the outlook or a negative rating action.
Indigold Carbon has an adequate liquidity position. Liquidity is
supported by the cash balances ($49 million at the end of 2010),
expectations for positive free cash flow, and full availability
under the revolving credit facility. At the close of the acquisition,
it is expected that the revolving facility will be undrawn.
The principal methodologies used in this rating were Global Chemical Industry
published in December 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Indigold Carbon (Netherlands) BV is a new holding company formed in connection
with the acquisition of Columbian Chemicals Acquisition, LLC by
The Aditya Birla Group and after consummation of the acquisition,
its subsidiary operations will be comprised of the existing Columbian
Chemicals business. It will be a guarantor of the debt and issuer
of audited financial statements. Indigold Carbon USA, Inc.
& other entities will be the borrowers under the proposed debt facilities.
Columbian Chemicals is currently majority owned by private equity firm
One Equity Partners and is a leading global manufacturer of carbon black
and carbon black derivatives. Headquartered in Marietta,
Georgia, the company has 11 operating facilities in the U.S.,
Canada, South America, Europe and Asia Pacific. Revenues
for the twelve months ending December 31, 2010 were $1.08
billion.
REGULATORY DISCLOSURES
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
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.
New York
James Wilkins
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Steven Wood
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns Ba3 CFR to Indigold Carbon; rates Term Loans and Revolver Ba3
No Related Data.
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