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Rating Action:

Moody's rates Indigold Carbon's $350mm incremental term loan Ba3; outlook stable

23 Oct 2012

New York, October 23, 2012 -- Moody's Investors Service assigned a Ba3 rating to Indigold Carbon (Netherlands) BV's (Indigold Carbon) proposed $350 million incremental five year term loan and affirmed its Ba3 Corporate Family Rating (CFR) and other debt ratings. Proceeds from the financing, along with approximately $75 million of existing balance sheet cash, will be used to fund an intercompany loan to a newly formed, wholly-owned subsidiary of SKI Investments Pte. Ltd. (Singapore), which will fund the consolidation of the Aditya Birla Group's carbon black businesses. The outlook is stable.

Rating assigned:

Indigold Carbon (Netherlands) BV

$350 million incremental term loan -- Ba3 (LGD3, 43%)

Ratings affirmed:

Indigold Carbon (Netherlands) BV

Corporate Family Rating -- Ba3

Probability of Default Rating -- Ba3

Outlook -- Stable

Indigold Carbon (Netherlands) BV, Indigold Carbon USA, Inc. & other borrowers

$75mm sr sec revolving credit facilities due 2016 -- Ba3 (LGD3, 43%) from Ba3 (LGD3, 42%)

$500mm sr sec term loan A due 2016 -- Ba3 (LGD3, 43%) from Ba3 (LGD3, 42%)

Outlook -- Stable

RATINGS RATIONALE

The Ba3 CFR rating is supported by Indigold Carbon's strong operating results since the acquisition by the Aditya Birla Group. The company has outperformed our expectations in 2012, and has expanded margins to record levels, such that its credit metrics will remain supportive of the Ba3 CFR with the additional $350 million of debt. Indigold Carbon's leverage is expected to be 3.8x (as of June 30, 2012, pro forma for the proposed financing and inclusive of Moody's standard analytical adjustments), which is slightly lower than the debt/EBITDA metric it had after the acquisition by the Aditya Birla Group (4.0x).

The CFR is also supported by the stable demand profile for carbon black (relative to other commodity chemical businesses), the company's strong market positions as one of the top three global producers, long-term customer relationships, and geographic diversity with operations in all major regions. Indigold Carbon offers a complete product line from commodity carbon blacks to higher margin specialty carbon blacks. Pressuring the ratings are meaningful customer concentration, modest global demand growth, exposure to volatile energy and petroleum-based feedstock costs, limited product diversity (carbon black) and commodity nature of the majority of the company's carbon black business.

The stable outlook reflects our expectation that the carbon black market will continue to grow at GDP-like rates, the company will maintain its margins and will generate positive free cash flow. Upside to the rating is limited due to the leverage, size of the company (annual revenues of approximately $1.5 billion), the commodity nature of the majority of its products, and recent volume softness, but a positive outlook could be considered should the company be able to reduce leverage toward 3.0x on a sustained basis. Any decline in EBITDA margins prior to the firm de-levering, or increase in leverage above 4.5x on a sustained basis could result in a downgrade of the ratings.

Indigold Carbon has a good liquidity position, supported by the cash balances ($21 million as of 9/30/2012, pro forma for the transactions), positive free cash flow, and full availability under its $75 million revolving credit facility. The company is expected to remain in compliance with its leverage and coverage financial covenants, which are not changing with the amendment to the existing credit facility.

The principal methodology used in rating Indigold Carbon was the Global Chemical Industry Methodology published in December 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Indigold Carbon (Netherlands) BV (Indigold Carbon) is a holding company formed in connection with the acquisition of Columbian Chemicals Acquisition LLC (Columbian Chemicals) by the Aditya Birla Group (Birla) in June 2011. The Birla carbon black business and Indigold Carbon business, on a combined basis, constitute the largest global carbon black producer with 17 production facilities. Revenues for the year ended June 30, 2012 were $1.5 billion.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, 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 has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant 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.

Information sources used to prepare the 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 considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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.

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Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

James Wilkins
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's rates Indigold Carbon's $350mm incremental term loan Ba3; outlook stable
No Related Data.
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