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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.          

 

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Related Issuers
Rating Action:

Moody's assigns Ba3 to Ingevity's new senior unsecured notes

20 Oct 2020

New York, October 20, 2020 -- Moody's Investors Service ("Moody's") has assigned a Ba3 rating to Ingevity Corporation's ("Ingevity") new $550 million senior unsecured notes due 2028. The proceeds of the notes issuance will be used to prepay the company's $375 million Term Loan due in 2022 and repay the borrowings under its revolving credit facility. Upon completion of the unsecured bond offering and prepayment of the term loan, Ingevity will reduce the size of its revolving credit facility to $500 million from $750 million and extend the revolver's maturity to 2025. The Ba3 rating on the new notes is subject to the transaction closing as proposed and receipt and review of the final documentation.

Ingevity's Ba2 Corporate Family Rating ("CFR") with a stable outlook remains unchanged.

Assignments:

..Issuer: Ingevity Corporation

....Senior Unsecured Regular Bond/Debenture, Assigned Ba3 (LGD5)

RATINGS RATIONALE

Ingevity's proposed notes issuance and refinancing will not change the company's net debt leverage, which remains adequate for its Ba2 CFR. The extended debt maturity will continue to support the company's sound liquidity profile.

The assigned Ba3 rating on the $550 million notes, in line with the existing $300 million senior unsecured notes, reflects their unsecured claim on the company's assets and effective subordination to the remaining $352 million senior secured term loan and the new $500 million revolving credit facility.

Ingevity's Ba2 CFR continues to reflect the company's market leaderships in activated carbon for gasoline vapor control and pine chemicals, its strong profitability and ample free cash flow generation, but also takes into account its relatively small business scale, reliance on key raw material suppliers and debt-funded growth strategy. In addition, the patent of its activated carbon "honeycomb" will expire in 2022, presenting a challenge to the company over time.

Ingevity indicated a strong improvement in its Q3 results, thanks to the rebound in automotive production and strong paving season in North America and globally, which offset the demand weakness in engineered polymers, industrial specialties and oilfield applications. Although Ingevity expects its full year earnings in 2020 to be lower than 2019 due to the global pandemic, its strong free cash flow will boost liquidity and financial flexibility.

Acquisitions remain an ongoing event risk for Ingevity as the management has grown the business through rather large acquisitions since its spin-off from WestRock Company in 2016. However, given the coronavirus outbreak and limited demand visibility, Moody's expects the company to focus on operational improvement, organic business growth and debt reduction. Management has a target net leverage of 2.0x to 2.5x.

Ingevity will maintain good liquidity given its large cash balance, positive free cash flow and availability under its $500 million revolving credit facility. After the notes offering and prepayment of the term loan, Ingevity will not have material debt maturities until 2023 when its $352 million term loan is due.

The new revolving credit facility will have two financial covenants--a maximum total net leverage ratio covenant of 4.0x (up to 4.5x allowed after permitted acquisition) and a minimum interest coverage covenant of 3.0x. We expect the company to remain in compliance under its covenants.

Environmental, social and governance (ESG) risk factors are not material factors to today's rating assignment, but are important considerations in the credit profile. Being a listed company, Ingevity is transparent in its financial reporting as well as its financial policy. Ingevity's activated carbon and pine chemical products involve the use of chemical materials, subjecting the company to environmental regulations. The production of pine chemicals using coproducts from natural kraft pulps, which are renewable and environmentally friendlier than petrochemical alternatives. In addition, the strengthening environmental regulations on vehicle vapor emission control continue to stimulate the demand on Ingevity's activated carbon products.

Ingevity's stable outlook reflects its adequate leverage and financial buffer to weather against unfavorable market conditions and that management will exercise caution when buying back shares or pursuing acquisitions in the next 12 to 18 months.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Moody's could upgrade the rating following a longer track record as a stand-alone entity that would demonstrate the company's commitment to the conservative financial policy. The company would need to increase its business scale and diversification, maintain its strong credit metrics, with debt/EBITDA below 3 times and RCF/Debt over 20%, for an upgrade.

The rating could be downgraded if the company's performance deteriorated or it undertook a large debt-funded acquisition or significant shareholder-friendly actions. Specifically, the rating could be downgraded if EBITDA margin falls sustainably below 20%; or its debt/EBITDA ratio rises above 3.5x and RCF/Debt declines to mid-teens.

Headquartered in North Charleston, SC, Ingevity Corporation is a global manufacturer of pine-based chemicals (Performance Chemicals segment) used in pavement technologies, oilfield technologies and industrial specialties such as inks and adhesives, and high performance carbon materials (Performance Materials segment) used in gasoline vapor emission control systems in fuel tanks, as well as applications for water, food, beverage and chemical purification. The company was spun off by WestRock Company in 2016. For the last twelve months ended June 30, 2020, the company generated approximately $1.2 billion in revenues. Ingevity acquired the Capa caprolactone business from Perstorp Holding AB for EUR590 million in February 2019.

The principal methodology used in these ratings was Chemical Industry published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1152388. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jiming Zou, CFA
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Glenn B. Eckert
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 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 CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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 APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER 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. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS 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.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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