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13 Aug 2010
New York, August 13, 2010 -- Moody's Investors Service upgraded Jarden's corporate family rating (CFR)
and probability of default rating (PDR) to Ba3 from B1 in connection with
the proposed amendment of a piece of its term loan and because of its
good operating performance despite the continuing economic uncertainty.
At the same time, we assigned a Ba1 rating to the new $470
million term loan and $150 million credit facility and affirmed
the Ba1 rating on the $600 million term loan. The rating
on the existing $1,075 credit facility will be withdrawn.
In addition to the CFR and PDR upgrades, the following other ratings
were also upgraded: speculative grade liquidity rating to SGL 1
from SGL 2, subordinated note rating to B1 from B3 and the unsecured
note rating to Ba3 from B1. The outlook is stable.
Jarden recently announced its intention to amend its credit agreement
to allow for the extension of its revolver and select term loan traunches
(totaling $470 million) to January 26, 2015 coterminous with
the maturity of the existing $600 million facility. The
revolving credit facility will be increased to $150 million from
"The upgrade in Jarden's corporate family rating and probability
of default rating reflect its strong operating performance throughout
the economic downturn, its improved liquidity profile with the proposed
amendment of its secured credit facility and Moody's expectation
of continued earnings and cash flow growth," said Kevin Cassidy,
Senior Credit Officer at Moody's Investors Service. For example,
financial leverage is expected to be around 4.5x by the end of
2010 and operating margins are expected to stay around 10% or better.
Liquidity is also anticipated to remain strong with cash over $500
million and no significant maturities over the next four years.
The upgrade in the speculative grade liquidity rating to SGL 1 from SGL
2 reflects the improved debt maturity schedule because of the maturity
date extension of almost $500 million of secured debt. In
addition to the maturity extension, we believe Jarden's good
liquidity profile is highlighted by cash balances of over $400
million and our expectation of more than $150 million of free cash
flow in 2011. Further benefiting Jarden's liquidity profile
is our view that Jarden will maintain at least 15% cushion under
its financial covenants each quarter and that it will continue to have
access to its undrawn $150M revolver that expires in January 2015.
The recent increase in the accounts receivable securitization facility
to $300 million ($250 million currently utilized) and extending
the tenure to three years from one year also benefits Jarden's liquidity
profile. While not overly significant, the payment of dividends
(around $40 million expected) and opportunistic share repurchases
somewhat constrain liquidity.
The two notch upgrade in the subordinated notes reflects the one notch
upgrade in the CFR and a modest change in Jarden's capital structure
with higher modeled revolver balances and fluctuations in payables.
The Ba3 corporate family rating reflects the company's significant and
increasing scale, its leading market position in various niche branded
consumer products, diverse product portfolio, expanding geographic
diversification and its good liquidity profile. The corporate family
rating also reflects the acquisitive nature of the company and its propensity
to increase shareholder returns despite having relatively high adjusted
financial leverage at around 5x. The rating is constrained by the
continuing uncertainty in discretionary consumer spending and weakness
in the global economy.
The stable outlook reflects Moody's view that Jarden will grow organically
between 3-5% in the near to mid-term while maintaining
EBITA margins of around 9% or better (currently 9.6%).
The outlook also assumes that the economic stresses in Europe do not materially
impact Mapa Spontex's or any other European business. The
lack of debt funded shareholder returns is also considered in the outlook
as is our expectation that financial leverage will be reduced to around
4.5x by the end of 2010.
A downgrade is not likely in the near term. However, a material
debt funded acquisition or an unexpected significant shock to the economy
combined with the following credit metrics could prompt a downgrade:
1) financial leverage well over 6x with no hope of reducing it,
2) low single digit operating margins, 3) low single digit retained
cash flow/adjusted debt percentages or the repeated consumption of cash.
A more likely scenario in the near to mid-term would be a negative
outlook. This could be driven by a sudden shift in consumer spending
habits for moderately priced branded consumer goods or an acquisition
that does not make strategic sense.
While a positive outlook is also unlikely in the near term, a significant
and unexpected increase in discretionary consumer spending could spur
a positive outlook. An upgrade could occur if Jarden moderates
its acquisition appetite and its credit metrics significantly improve
from their current levels. For example, adjusted financial
leverage, which is currently around 5x, would need to be well
below 4x, EBITA margins, which are currently under 10%,
would need to be in the mid teens and retained cash flow to net debt,
which is currently around 15%, would need to be around 20%.
The following ratings were assigned:
$470 million term loan due January 2015 rated Ba1 (LGD 2,
$150 million revolving credit facility due January 2015 rated Ba1
(LGD 2, 19%);
The following ratings were upgraded/assessments revised:
Corporate family rating to Ba3 from B1;
Probability of default rating to Ba3 from B1;
$300 million senior unsecured notes to Ba3 (LGD 3, 49%)
from B1 (LGD 4, 55%);
$650 million senior subordinated notes to B1 (LGD 5, 74%)
from B3 (LGD 5, 85%);
$455 million senior subordinated notes to B1 (LGD 5, 74%)
from B3 (LGD 5, 85%);
Speculative grade liquidity rating to SGL 1 from SGL 2;
The following rating was affirmed;
$600 million amended term loan due January 2015 at Ba1 (LGD 2,
19%) -- no change in LGD assessment;
The following rating will be withdrawn;
$1,075 billion credit facility maturing January 2012 rated
Moody's subscribers can find further details in the Jarden Credit Opinion
published on Moodys.com.
The last rating action was on January 12, 2010, where Moody's
upgraded Jarden's secured credit facilities and unsecured notes to Ba1
and B1, respectively. All other ratings were affirmed with
a positive outlook.
The principal methodology used in rating Jarden was Moody's Global Consumer
Durables Goods methodology published in August 2007 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 rating Jarden can also be found in the Rating Methodologies
sub-directory on Moody's website.
Jarden Corporation is a manufacturer and distributor of niche consumer
products used in and around the home. The company's primary segment
include Consumer Solutions (which distributes kitchen appliances,
and home vacuum packaging systems), Branded Consumables (which distributes
playing cards, arts and crafts, plastic cutlery and firelogs),
and Outdoor solutions (which distributes a variety of outdoor leisure
products under the K2, PureFishing, Coleman and Campingaz
brands). Headquartered in Rye, NY the company reported net
sales of approximately $5.5 billion for the twelve months
ended June 30, 2010.
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's upgrades Jarden's CFR to Ba3; amended term loan rated Ba1; outlook is stable
250 Greenwich Street
New York, NY 10007
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