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Rating Action:

Moody's rates INVISTA Equities, LLC CFR at Ba1; outlook stable

26 Sep 2017

New York, September 26, 2017 -- Moody's Investors Service, ("Moody's") assigned a Ba1 Corporate Family Rating ("CFR") to INVISTA Equities, LLC as INVISTA Equities, LLC will become successor consolidated parent for the Koch Industries Inc. (unrated) investment in INVISTA business. Moody's also affirmed the ratings of INVISTA B.V. and INVISTA Finance LLC. The corporate restructuring will move the holding companies that control its US assets and foreign subsidiaries from INVISTA B.V. (Ba1 stable) to INVISTA Equities, LLC. INVISTA Equities, LLC, will replace INVISTA B.V. as the guarantor for the existing secured notes at INVISTA Finance LLC. The outlook on the ratings is stable.

"The reorganization simplifies INVISTA's corporate structure and reduces administration costs, which we view as a modest credit positive," stated John Rogers, Senior Vice President at Moody's and lead analyst on INVISTA.

Ratings assigned:

..Issuer: INVISTA Equities, LLC

.... Corporate Family Rating, Assigned Ba1

.... Probability of Default Rating, Assigned Ba1-PD

.Outlook, Stable

Ratings affirmed:

Issuer: INVISTA Finance LLC

.... Secured notes at Ba1, LGD 3

.Outlook, Stable

..Issuer: INVISTA B.V.

.... Corporate Family Rating, Previously Assigned Ba1*

.... Probability of Default Rating, Previously Assigned Ba1-PD*

.Outlook at Stable*

*: Ratings will be withdrawn once the restructuring is completed

RATINGS RATIONALE

INVISTA Equities, LLC's (INVISTA) Ba1 Corporate Family Rating is supported by a leading market share in the Nylon 6,6 chain, strong manufacturing technology, diversified operations and scale (as measured by revenues of approximately $4.8 billion as of LTM June 30, 2017). Moreover, the company has improved its cost structure over the past three years through investments in plant optimization and expense reduction programs. INVISTA recently completed a large capex program aimed at optimizing its global footprint in nylon polymers and intermediates, capacity expansions, process improvements, installing a global ERP system, as well as other projects.

As part of this restructuring INVISTA is terminating its syndicated credit facility and establishing a new $250 million unsecured revolving credit facility due 2023 with Koch Industries Inc. (unrated). There is no formal rating uplift from its ownership by Koch. However, Moody's does believe that its status as an affiliate of Koch, improves INVISTA liquidity over and above its access to an unsecured revolver.

INVISTA generates substantial retained cash flow and recently began to generate meaningful positive free cash flow, as capital spending declined 50% in 2016 due to completion of its SAP implementation, process improvements and the startup in China of a hexamethylenediamine (HMD; a nylon intermediate) and nylon 6,6 polymer facilities. INVISTA's metrics are expected to be strong for the Ba1 rating, with leverage at 2.4x as of LTM June 30, 2017 (on a Moody's adjusted basis) and declining to the low 2x range by the end of 2017. Moody's noted that INVISTA has maintained a large cash balance over the past several years reducing net leverage to 1.5x.

INVISTA's Ba1 rating is currently constrained by its narrow product portfolio and secured capital structure. Additional negative factors in the credit profile include the cyclical and commodity nature of INVISTA's products, raw material volatility (as evidenced by the large swings in butadiene feedstock pricing earlier in 2017) and lack of back-integration into sometimes volatile petrochemicals.

The stable outlook reflects our expectation that INVISTA will continue to generate substantial retained cash flow, and focus future capex to minimize the impact on free cash flow and cash balances. While it is unlikely that Moody's would consider upgrading INVISTA's ratings given its secured capital structure, the rating could be upgraded if net leverage is sustained at less than 2.0x and Retained Cash Flow/Debt is sustained above 30%. Conversely, Moody's could lower the company's rating if its net leverage were to be sustained at over 3.0x, or if retained cash flow/debt dropped below 20%.

The principal methodology used in these ratings was the Global Chemical Industry Rating Methodology published in December 2013. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

INVISTA Equities, LLC, with significant operations in the United States, is one of the world's leading integrated producers of nylon 6,6 polymers and fibers (spandex). The company is also a merchant seller of related nylon and polyester chemical intermediates and by-products. INVISTA uses the tradename LYCRA® for its nylon 6,6 (spandex) fibers. The company is an independently managed, wholly-owned, indirect subsidiary of Wichita, Kansas-based Koch Industries, Inc. Revenues were $4.8 billion for the 12 months ending June 30, 2017.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

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

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.

John Rogers
Senior Vice President
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

Brian Oak
MD - Corporate Finance
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.
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