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20 Apr 2011
New York, April 20, 2011 -- Moody's Investors Service raised MacDermid Incorporated's (MacDermid)
Corporate Family Rating (CFR) to B2 from B3, ratings on the revolving
credit facility and term loan to Ba3 from B2 and rating on the subordinated
notes to Caa1 from Caa2. The rating upgrade follows improved operating
performance as sales continue to improve and profits benefit from operating
leverage after significant restructuring efforts. Anticipation
that end markets will remain stable or continue to improve as well as
solid cash levels and liquidity expectations support the rating increase.
The outlook is stable.
The following summarizes the ratings.
MacDermid, Incorporated
Ratings upgraded:
Corporate Family Rating --B2 from B3
Probability of Default Rating --B2 from B3
$50mm Gtd sr sec revolving credit facility due 2013 -- Ba3
(LGD2, 29%) from B2 (LGD3, 33%)
$360mm Gtd sr sec term loan due 2014 -- Ba3 (LGD2,
29%) from B2 (LGD3, 33%)
Euro Gtd sr sec term loan due 2014 -- Ba3 (LGD2, 29%)
from B2 (LGD3, 33%)
$350mm Gtd sr subordinated notes due 2017 -- Caa1 (LGD5,
84%) from Caa2 (LGD5, 85%)
Outlook: Stable
RATING RATIONALE
The upgrade in MacDermid's B2 CFR reflects the operating improvements
experienced over the past year and our expectations that the company will
continue to grow its revenues and cash flows as its core electronics,
industrial and offshore markets support steady demand for its products.
New applications for existing products and modest growth in existing end
markets are expected to support growth. The company's profits
have benefited from past restructuring efforts and operating leverage
as sales volumes have improved, allowing the company to produce
record profits on sales that remain below peak levels. While some
costs will naturally increase as sales grow, we expect the company
to continue to enjoy strong EBITDA margins (24% for 2010,
up from 19% for 2009).
MacDermid's B2 CFR reflects the company's significant debt and interest
expense burden as well as a favorable business environment supporting
steady volume growth. The ratings are supported by MacDermid's
strong market positions in certain niche markets, improving margins
reflective of more specialty-type products, modest capital
expenditure requirements, and limited exposure to volatile raw materials
costs. The majority of MacDermid's raw materials are not petrochemical-based
and therefore the company does not experience the same cost pressures
as other chemical firms. The company benefits from geographic,
operational and product diversity through its global footprint with significant
operations in the US, Europe, and Asia as well as a diverse
revenue stream.
MacDermid's liquidity is supported by expectations for positive free cash
flow in 2011, strong cash balances ($107 million as of December
31, 2010) and availability under its $50 million revolving
credit facility due 2013. We expect the continuation of positive
free cash flows as long as sales volumes remain at current levels or advance
further. The company has been carrying high cash balances to maintain
strong liquidity.
The stable outlook reflects expectations that demand for MacDermid's
products in its core industrial, electronics and offshore solutions
markets will grow modestly and be supplemented by new applications and
markets for its products. Profits will continue to benefit from
past restructuring activities and will be sufficient for MacDermid to
service its debt obligations. There is limited upside to the rating
at this time as the high leverage restricts the rating. Before
an upgrade could be considered, Moody's would expect MacDermid to
demonstrate the ability to continue growing its sales and cash flows and
lower its leverage below 4.5x on a sustained basis. MacDermid's
ratings or outlook will be under pressure if its 2011 sales and EBITDA
results deteriorate, if it fails to generate meaningful free cash
flow, or if liquidity declines.
The principal methodology used in rating MacDermid Incorporated was the
Global Chemical Industry Methodology, published December 2009.
Other methodologies used include Loss Given Default for Speculative Grade
Issuers in the US, Canada, and EMEA, published June
2009.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last Credit Rating Action and the rating history.
MacDermid, Incorporated is a global manufacturer of a variety of
chemicals and technical services for a range of applications and markets
including; metal and plastic finishing, electronics,
graphic arts, and offshore drilling. In April 2007,
MacDermid was taken private through a management led buy-out and
is currently owned by investment funds managed by Court Square Capital
Partners and Weston Presidio, and by MacDermid management,
including Daniel Leever, its Chairman & CEO. The company
maintains its headquarters in Denver, Colorado and operates facilities
worldwide. Revenues for the fiscal year ending December 31,
2010, were $694 million.
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 raises MacDermid's CFR to B2 from B3
No Related Data.
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