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14 Apr 2011
London, 14 April 2011 -- Moody's Investors Service has today changed its rating on Carmeuse Holding
S.A. to B1 and has assigned a provisional (P) B1 rating
to Carmeuse's new Senior Secured notes. The outlook on all ratings
The change in the rating was prompted by a positive operating performance
in 2010 and by the announced refinancing of the portion of its existing
debt with shorter maturities with a new HY bond and bank loans with longer
As a result of the refinancing, we note the factors previously constraining
Carmeuse's corporate family rating, and namely the group's
challenging debt amortization schedule and high refinancing risk profile
over the period 2011 to 2014, related to high debt repayments scheduled,
the expiration of the existing Revolver facility in 2012 and of the FRNs
in 2014, are addressed by the new envisaged debt structure.
The new debt structure resulting from the refinancing a) extends the average
debt maturity profile of the Group; b) improves the debt repayment
schedule, reducing the related short term refinancing risks,
and notably the refinancing risk on the FRNs maturing in 2014, as
the new financing package includes a committed Back Stop Facility which
will be entirely used in 2014 to repay a substantial amount of the FRNs;
and c) provides a larger and longer term Revolver facility, compared
to the current Revolver which will be refinanced in full.
Despite the improvements noted above, the rating still factors in
the relatively high level of financial debt in absolute terms and also
compared to the overall size of the group, and Carmeuse still relatively
high exposure to the North American market (which accounted for 55%
of revenues in 2010) and to the steel industry (the major end market,
accounting for 30% of revenues in 2010), which has been identified
as a threat in the past due to its relatively high cyclicality.
However, Moody's acknowledges the leading positions the group
holds in its reference markets, the long term relationships with
its mainly blue chips customers.
The liquidity position of Carmeuse has improved from adequate to good,
as a result of both the positive cash flow generated during 2010,
and assuming the refinancing plans are successful. In particular,
we consider positively the expected positive operating cash flow generation
during 2011, and the new improved debt structure in place,
which includes a larger committed Revolver facility available.
Reasons for a still cautious assessment, in spite of the abscence
of debt amortisation in 2011, are the substantial cash outflows
planned in 2011 for capex and, to a lower extent, for working
capital and dividends, which will translate into a substantial drawing
under the new Revolver facility in 2011. However, we note
the relatively high financial flexibility the Group will be able to display,
if needed. Based on the recent downturn experience, it would
be possible to reduce capex requirements to lower amounts than planned
in order to still adequately support existing operations, as demonstrated
during 2009 and 2010. Furthermore, additional cash could
also be made available, if needed, from either a disposal
of non-core assets or the sale of excess CO2 emission rights owned
by the Company.
The outlook on the CFR remains positive, as we believe the Group
is on a positive trajectory to achieve better credit metrics over the
next 12 to 18 months. The expected successful execution of the
announced refinancing should provide a more solid foundation for a strategy
focused on further operating cash flow generation and debt reduction,
which would be needed to see an improvement in the credit metrics.
The positive outlook also reflects Moody's expectation that the
group will maintain a cautious approach in the implementation of its investment
strategy and will focus on keeping a solid financial structure and liquidity
profile through the cycle.
The assignment of a definitive rating to the new Senior secured Guaranteed
Notes is subject to a review of the final associated documentation.
Moody's issues provisional ratings in advance of the final issue of securities,
and these ratings only represent Moody's preliminary opinion. Upon
a conclusive review of the transaction and associated documentation,
Moody's will endeavor to assign definitive ratings to the securities.
A definitive rating may differ from a provisional rating. The new
7-years Senior secured Guaranteed Notes included in the refinancing
plan will be used by Carmeuse to partially repay its existing debt and
will rank pari passu with the new senior secured bank debt and the existing
FRNs and share the same security package. Moody's is assigning
a (P) B1 rating to these new notes. The outlook remains positive
for all notes.
The rating could be downgraded if the announced refinancing is unsuccessful
and/or a fast deterioration in the operating performance occurs,
leading to substantial negative free cash flow generation, with
adjusted Debt / EBITDA rising above 3.5x hence reducing the headroom
on the financial covenants, and with RCF / Net debt dropping below
The rating could be upgraded if the Group can further improve its operating
and financial performance, managing to further reduce adjusted Debt/EBITDA
ratio sustainably below 3x, either via internal positive free cash
flow generation or via disposal of non-core assets. An upgrade
would also require Carmeuse to produce stronger annual FFO and display
RCF / Net debt in excess of 20% and FCF / Debt in the mid single
The principal methodology used in rating Carmeuse Holdings SA was Moody's
Global Building Materials Industry, published in July 2009 and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
Carmeuse Holding SA is the holding company for the Carmeuse Group,
one of the world's leading producers of lime and lime-related products
enjoying leading positions in a number of European markets and a number
one position in North America, which has been further strengthened
after the acquisition of Oglebay Norton in 2008. The company operates
in a niche industry with only a handful of large players globally,
while its operations are subject to licenses and are difficult to replicate.
Carmeuse reported EUR 1,129 million in revenues in 2010 and an EBITDA
of Eur 247 million.
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.
The rating has been disclosed to the rated entity or its designated agents
and issued with minor amendments resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
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
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moody's changes its rating on Carmeuse to B1 from B2 and assigns a provisional (P) B1 rating to Carmeuse new USD 375 million senior secured notes. Outlook on all ratings remains positive.
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