Moody’s gives IMCD, notes Baa3

Moody’s Investors Service said it gave Baa3 ratings to IMCD NV and its planned guaranteed senior unsecured notes.

In explaining the rating, Moody’s cited IMCD’s leading positions in the specialty chemical distribution market, track record of fairly stable operational performance through economic cycles owing to its exposure to life science end markets, fairly flexible cost base and a good diversification in terms of products and customers, margins consistently higher than chemical distribution industry peers, because of its focus on higher value-added products and services and its consistent and meaningful free cash flow generation track record.

Offsetting these strengths, the agency noted the company’s small scale, some exposure to cyclical industrial applications, some risk of concentration among suppliers and increasing pressure on input costs.

“The Baa3 rating for the proposed issuance, in line with the Baa3 long-term issuer rating, reflects the instrument's status as senior unsecured debt in an investment grade type of structure. Sizeable deferred and contingent considerations at operating subsidiaries, representing roughly a third of the entire adjusted debt, would likely rank ahead of bondholders in a restructuring scenario. However, given the relatively long distance to default as indicated by the investment-grade rating, Moody's does not notch the proposed bonds raised at a holding entity level down from the long-term issuer rating,” the agency said in a press release.

The outlook is stable.

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