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Global Credit Research - 23 Sep 2010
Approximately $455 million of proposed new debt securities rated B1
New York, September 23, 2010 -- Moody's Investors Service assigned ratings to General Chemical Holding
Company (GCHC), a specialty chemical manufacturer (see list of proposed
ratings below), for its recapitalization . GCHC was assigned
a B1 Corporate Family Rating (CFR). The existing ratings of GenTek
Holding, LLC are affirmed. The proposed rating outlook is
In October 2009 GenTek Inc.was acquired by ASP GT Holding Corp.,
a wholly-owned subsidiary of investment funds managed by American
Securities LLC, a private equity firm. GCHC has proposed
a refinancing of the existing Credit Facilities with a new $30
million, 4-year, senior secured revolver and $425
million, 5-year, senior secured term loan. The
proceeds of which will be used to 1) refinance the Company's existing
credit facilities, 2) fund a $150 million distribution to
GCHC shareholders, and 3) pay related fees and expenses.
GCHC's ratings and outlook are subject to review of the final documentation
of the financing and closing of the transaction as described.
General Chemical Holding Company Corporate Family Rating --
Probability of Default Rating -- B1
General Chemical Corporation
$30 million Sr Sec Revolver due 2014 -- B1 (LGD3, 44%)
$425 million Sr Sec Term Loan B due 2015 - --
B1 (LGD3, 44%)
GenTek Holding, LLC*
$30 million Sr Sec Revolver due 2013 -- B1 (LGD3,
$325 million Sr Sec Term Loan B due 2014 -- B1 (LGD3,
* these ratings will be withdrawn upon completion of the recapitalization
GCHC's BI CFR is weakly positioned in the B1 category and reflects significant
debt leverage, a relatively small revenue base relative to adjusted
debt balances (revenues were $392 million for the LTM period ending
August 30, 2010), negative tangible net worth and reduced
asset profile in its restructured operations. Debt, when
adjusted for our standard adjustments, (including unfunded pensions
of $71 million and capitalized rents of $10 million) is
about $506 million, assuming no borrowings under GCHC's revolver,
a material increase over the $390 million of adjusted debt when
it was initially acquired. At this level of debt proforma estimated
leverage for 2010 would be about 3.7 times up from 3.1 times.
In 2009 GCHC benefited from a decrease in raw material costs while a portion
of revenues were contractually set at prices negotiated when raw material
prices were high. As these contracts have been renegotiated in
2010, EBITDA has dropped to more normalized levels and absent debt
reduction leverage in 2011 would likely increase.
While GCHC has a small business profile, the rating reflects the
less cyclical nature of the company's water treatment revenue base,
improved financial performance in recent years, and free cash flow
generation used for debt reduction. In addition, the rating
recognizes the potential benefits from a number of restructuring and cost-cutting
initiatives that the company has undertaken, as well as the prospect
of reduced levels of capital spending that should aid in the generation
of free cash flow for debt reduction.
GCHC's B1 CFR also takes into consideration the sponsor's initial publicly
stated focus on debt reduction, a business strategy less focused
on driving market share growth and more on improving free cash flow with
proceeds to be used for de-levering. While some debt reduction
occurred since October 2009, this transaction suggests a need for
a renewed focus on debt reduction.
The rating outlook for GCHC is stable. Factors that could have
negative rating implications include a failure to maintain historical
margins as raw material prices decrease and deterioration in its key end-market
conditions. Factors that could have positive rating implications
include a substantial improvement in financial performance and meaningful
permanent debt reductions.
GCHC, after a business segment restructuring of GenTek Inc.'s
assets, is a company that operates in three business segments.
The largest segment, with some 73% of revenues (for the LTM
period ending August 31, 2010), is the water treatment segment.
This segment provides inorganic coagulants for water treatment applications
to customers that include municipalities and industrial users for primarily
paper making applications. The municipal customers supply agreements
are often structured with one year terms based on sealed bids; while,
the Industrial agreements are negotiated at varying lengths. We
project revenues from continuing operations for the year ending December
31, 2010 will approach $400 million and EBITDA will be well
above $100 million.
The B1 rating on the senior secured revolver and term loan B reflects
their dominant position in the company's debt structure, relative
proximity to the chemical operating assets, being issued from GenTek
Holding, LLC, and benefits of the collateral package.
The facility will be secured by a first priority lien on the capital stock
as well as all domestic assets of the company and its subsidiaries,
and will be guaranteed on a senior secured basis by all current and future
domestic subsidiaries. GCHC is also expected to guarantee the credit
The principal methodology used in rating General Chemical Holding Company
was Global Chemical Industry rating methodology published in December
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.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information, confidential and proprietary Moody's
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
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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
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns General Chemical Holding a B1 CFR
250 Greenwich Street
New York, NY 10007
No Related Data.
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