New York, September 21, 2010 -- Moody's Investors Service upgraded Compass Minerals International,
Inc.'s (Compass Minerals) Corporate Family Rating (CFR) to Ba1
from Ba2 and assigned Ba1 ratings to its proposed $125 million
revolving credit facility due 2015 and amended / extended term loan tranche
due 2016. The rating on the senior unsecured notes due 2019 was
upgraded to Ba2 from B1 and the term loan tranche due 2012 was upgraded
to Ba1 from Ba2. The upgrade in the company's ratings reflect
the company's modest leverage for its rating category and the benefit
to liquidity of securing a new five year revolving credit facility.
The rating outlook is stable.
The following summarizes the rating actions taken:
Compass Minerals International, Inc.
Corporate Family Rating -- Ba1 from Ba2
Probability of Default Rating -- Ba1 from Ba2
gtd sr sec term loan facility due 2012 -- Ba1 (LGD3, 39%)
from Ba2 (LGD3, 41%)
$125mm gtd sr sec revolving credit facility due 2010 -- Ba1
(LGD3, 39%) from Ba2 (LGD3, 41%)
$100mm gtd sr unsec notes due 2019 -- Ba2 (LGD5, 89%)
from B1 (LGD5, 89%)
gtd sr sec term loan facility due 2016 -- Ba1 (LGD3, 39%)
$125mm gtd sr sec revolving credit facility due 2015 -- Ba1
The rating on the existing revolver will be withdrawn upon the completion
of the financing transactions.
Compass Minerals is in the process of establishing a new five year $125
million revolving credit facility to replace the existing facility maturing
in December 2010, and amending / extending a portion of its existing
Term Loan B (and incremental Term Loan B) from a December 2012 maturity
to January 2016. The company will likely extend more than half
of the $391 million outstanding under the Term Loan B and incremental
Term Loan B such that it will have staggered maturities. Certain
restrictions under the credit agreement will be relaxed with the amendment.
We view the transactions as positives for the company's liquidity,
debt maturity profile and financial flexibility.
The upgrade in Compass Minerals CFR reflects our expectations for positive
free cash flow from the salt business even as the company invests in expansionary
capital projects, our positive view of the agricultural sector,
the improvement in liquidity and credit metrics supportive of the Ba1
CFR. The completed capacity expansion at the Goderich, Ontario
salt mine is expected to support sales volume growth in the salt segment.
The company's cash flows continue to benefit from high fertilizer
prices (SOP around $500 per tonne), that remain above historical
averages even after dropping from peak levels (around $950 per
tonne) achieved in 2008. Sulfate of potash (SOP) capacity expansions
will support growth in the intermediate-term.
The Ba1 CFR reflects Compass Minerals' low leverage, the company's
entrenched position as the leading North American producer of highway
deicing salt, its access to extensive and high quality salt deposits,
its efficient distribution network characterized by access to lower cost
water transportation, as well as its position as the leading North
American producer of sulfate of potash. The company's low leverage
is due to a substantial increase in earnings from its fertilizer business
over the past two years - Debt to EBITDA is at 1.9 times
for the twelve months ended June 30, 2010 (ratio incorporates Moody's
global standard analytical adjustments). Further de-levering
is expected as earnings grow, but the company is unlikely to target
a much lower leverage profile through further repayment of debt.
The ratings are tempered by the volatility in sales due to weather conditions
and the mature nature of the highway deicing business, characterized
by low single digit volume growth rates, as well as the need to
pursue capital projects or acquisitions to provide more reasonable revenue
and earnings growth over time. Moody's also notes that Compass
Minerals pays a significant dividend to shareholders.
The stable outlook is supported by strong pricing for its fertilizer business
(relative to long-term historical pricing) and the ability of salt
producers to post strong earnings (supported by price increases).
Moody's expects favorable potash pricing (above long-term historical
averages) will continue, as fertilizer sales volumes rebound.
Anticipated additional sales made possible from increases in salt and
SOP production capacity will add to earnings.
The company's business profile, modest size and secured capital
structure constrain the CFR to a non-investment grade rating,
despite strong financial metrics for the current rating category.
Further growth in the company's revenues and in the specialty fertilizer
business such that it becomes a larger contributor to Compass Minerals'
overall earnings could help the firm's profile. The intention
to move to an investment grade capital structure (including unsecured
financing with extended maturities), a stated desire to maintain
an investment grade rating and specific financial policies to support
an investment grade rating would be required before an upgrade to Compass
Minerals' ratings would be considered.
Moody's most recent announcement concerning the ratings for Compass Minerals
was on May 21, 2009, when the firm's rating outlook was moved
to positive as a result of improvement in its leverage profile and credit
The principal methodologies used in rating Compass Minerals International,
Inc were Global Chemical Industry published in December 2009, and
Loss Given Default for Speculative-Grade Non-Financial Companies
in the U.S., Canada and EMEA published in June 2009.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
Compass Minerals International, Inc., headquartered
in Overland Park, Kansas, is a leading North American producer
of salt used for highway deicing, food grade applications,
water conditioning, and other industrial uses. The company
is also North America's largest producer of sulfate of potash (SOP) used
in specialty fertilizers. The company had revenues and net sales
of $1.031 billion and $771 million, respectively,
for the twelve months ended June 30, 2010.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public 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.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades Compass Minerals to Ba1, rates new debt Ba1; stable outlook
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