New York, February 22, 2022 -- Moody's Investors Service ("Moody's") assigned
a Baa3 first-time issuer rating to AptarGroup, Inc.
("Aptar"). The rating outlook is stable.
"Aptar's Baa3 issuer rating reflects the company's focus on
differentiated products, higher profitability than peers'
in the packaging industry, and moderate leverage, which is
counterbalanced with inherent volatility in its beauty segment,"
said Motoki Yanase, VP - Senior Credit Officer at Moody's.
Moody's took the following actions:
Assignment:
..Issuer: AptarGroup, Inc.
.... Issuer Rating, Assigned Baa3
Outlook Action:
..Issuer: AptarGroup, Inc.
....Outlook, Assigned Stable
RATINGS RATIONALE
The Baa3 rating takes into account Aptar's strong profitability,
with an adjusted EBITDA margin of around 20%, supported by
high-margin pharmaceutical products and focus on differentiated
products for food, beverage, beauty, personal care and
home care markets. The rating also reflects Aptar's geographic
diversification across Europe, North America, South America
and Asia, which supports stable profitability. The rating
further incorporates the company's strong cash flow generation capability
that has helped maintain moderate leverage of around 2x historically,
incorporating Moody's standard adjustments.
As for the environmental, social and governance (ESG) factors incorporated
into the rating, Moody's considered Aptar's sound financial
policy as part of its governance profile. The sound financial policy
is evidenced by a good track record of maintaining moderate leverage,
ample liquidity, and an unsecured capital structure, which
positions the company strongly among the similarly rated peers.
On the other hand, Aptar's credit profile is constrained by volatility
in beauty products, which is affected by the disruption caused by
the pandemic. The credit profile is also impacted by the intense
competition in the fragmented packaging industry, requiring Aptar
to continue investing in both R&D and capital spending to effectively
compete and maintain its margin.
Moody's expects the company to maintain very good liquidity that
can cover its cash uses over the next 12 months. The company's
total cash sources, including about $123 million cash balance
as of December 2021 and projected cash flow from operations, will
cover its total liquidity requirements, including debt maturities,
capital spending and dividends projected by Moody's.
In addition, the company has a $600 million multi-currency
revolving credit facility that supplements its liquidity profile.
The revolver expires in June 2026. The co-borrowers of the
revolver are AptarGroup, Inc., the ultimate US parent,
and AptarGroup UK Holdings Limited, an intermediate holding company
in the UK for the group's European operations.
Financial covenants for the credit facilities include a maximum net debt-to-EBITDA
ratio of 3.5x and a minimum EBITDA-to-interest coverage
ratio of 3.0x. The company is likely to maintain a significant
buffer under the financial covenants over the next four quarters.
The Baa3 rating assumes Aptar completes the assignment of its €300
million senior unsecured notes due 2023 and 2024 to the US parent,
which will eliminate the potential structural subordination of the US
parent debt. Moody's expects the assignment to be completed
by the first week of March.
Concurrent with the new rating, Moody's also assigned ESG
scores to Aptar. Among the E, S and G issuer profile scores
(IPS), governance IPS of G-2 represents the neutral-to-low
impact to Aptar's credit quality, which is considered in the
rating.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The stable outlook reflects Moody's expectation that Aptar will continue
to generate positive free cash flow and maintain moderate leverage over
the next 12-18 months.
Moody's could upgrade Aptar's rating if the company maintains strong credit
metrics and continues expansion of its business that lowers customer concentration
of sales within each of its reporting segments. Specifically,
Moody's could upgrade the rating if Aptar maintains debt-to-EBITDA
ratio below 2.25x and positive free cash flow on a sustained basis.
Moody's could downgrade the rating if Aptar's credit metrics and liquidity
deteriorate, while competition stiffens. Large acquisitions,
share repurchases or dividends could also strain its ratings. Specifically,
Moody's could downgrade the rating if Aptar's debt-to-EBITDA
ratio rises above 2.75x, EBITDA to interest coverage falls
below 6.0x or liquidity deteriorates.
The principal methodology used in this rating was Packaging Manufacturers:
Metal, Glass and Plastic Containers published in December 2021 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287890.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Headquartered in Crystal Lake, Illinois, AptarGroup,
Inc. is a global supplier of a broad range of dispensing,
sealing, active material science solutions and services.
The company generated about $3.2 billion of revenues for
the twelve months that ended in September 2021.
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 rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is 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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK 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.
Motoki Yanase
VP - Senior Credit Officer
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
Gretchen French
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
