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Moody's rates Styron loans B2
Moody's Investors Service said it assigned B2 corporate family and probability of default ratings to Styron and B2 (LGD3, 46%) ratings to its $240 million guaranteed senior secured first-lien revolving credit facility due 2015 and $800 million guaranteed senior secured first-lien term loan due 2016.
The outlook is stable.
Proceeds from the transaction along with $640 million of cash equity will be used to purchase the assets of Dow Chemical Co.'s Styron business. Dow will also receive a $75 million holdco PIK note and 7.5% of the common equity in Styron, which is owned by an affiliate of Bain Capital Partners.
The agency said that despite Styron's relatively strong pro forma credit metrics and a substantial asset base, the B2 rating largely reflects the lack of detailed historical financial statements for the business, combined with the limited operating history as an independent entity.
The rating also reflects Styron's narrow portfolio of commodity and quasi-commodity products, substantial exposure to volatile feedstock prices, limited organic volume growth and the small size of its revolver, Moody's said.
The company's credit profile is supported by a substantial cash equity investment by its sponsor, relatively strong pro forma credit metrics, leading market positions in three of its four product lines (polycarbonates is the exception), relatively stable volume demand due to the consumable nature of its products and an experienced management team.
Based on Moody's analysis of Styron's limited financial information combined with adjustments to reflect its status as a stand-alone entity, Styron's 2009 debt-to-EBITDA ratio is estimated be 4.2 times.
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