Fitch rates Champion B, loan B+

Fitch Ratings said it gave a first-time B issuer default rating to Champion (SCUR-Alpha 1503 GmbH) and B+/RR3 ratings to its planned €2.9 billion term loan to be borrowed by Champion and co-borrowers AI Montelena Bidco LLC (USA) and AI Montelena (Netherlands) BV.

The term loan will be used to help buy the engineering material businesses of Royal DSM NV and Lanxess AG. Private equity firm Advent International will own 60% of the joint venture company ultimately controlling Champion. Lanxess will own the remaining 40% and will provide added liquidity in the form of a preferred equity instrument. The transaction will also be funded by payment-in-kind notes to be issued outside the senior secured restricted group by holding companies indirectly controlling Champion.

“The expected IDR reflects Champion's high EBITDA gross leverage, which we expect to trend down from 6.8x in 2023 to below 5x by 2026 as the company delivers synergies and benefits from growing demand from key automotive and electronics sectors. Champion will have the scale and financial flexibility to invest in new compounding capacity to capture market growth,” Fitch said in a press release.

The outlook is positive, which the agency said reflects a clear path to lower leverage.

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