Moody’s adds LD to CSTN rating

Moody’s Investors Service said it downgraded the probability of default rating for CSTN Merger Sub, Inc. (Cornerstone Chemical Co.) to Caa3-PD/LD from Caa2-PD. The LD was appended after it entered a $50 million super-senior secured bridge facility term sheet on Aug. 25, which will provide added liquidity that is needed to continue operations until end market demand and profitability recover.

The agency also affirmed Cornerstone’s corporate family rating at Caa2 and its $450 million of 10¼% senior secured notes due 2027 at Caa2.

“Coincident with the new facility, holders of the existing 2027 notes have also agreed to extended the grace period for a default on interest payments from 30 days to 361 days. Given that the first $20 million interest payment on the 2027 notes was scheduled to be paid on Sept. 1, 2023, there will likely be an extended delay in the actual payment.

“Furthermore, consistent with Moody's policies these agreements constitute a distressed exchange. Hence Moody's downgraded Cornerstone's PDR rating to Caa3-PD /LD. A distressed exchange is when bondholders make concessions that amount to a diminished financial return relative to the original obligation with the effect of the transaction being the avoidance of an eventual payment default on the debt,” the agency said in a press release.

The outlook is negative.

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