Moody’s upgrades Evonik, program to Baa1

Moody's Investors Service said it upgraded the issuer and senior unsecured bond ratings of Evonik Industries AG to Baa1 from Baa2 and the rating assigned to the medium-term note program of Evonik and its guaranteed subsidiary Evonik Finance BV to provisional Baa1 from provisional Baa2.

The outlook was revised to stable from positive.

Moody’s said the upgrade follows Evonik’s announcement that it reached an agreement to acquire the specialty and coating additives business (Performance Materials Division) of Air Products and Chemicals, Inc. (A2 stable) for $3.8 billion (about €3.5 billion).

The acquisition will enhance the specialty chemicals franchise of Evonik and reduce the degree of event risk that has been attached to its credit profile in the context of the mid-term growth aspirations set by management in September 2013. While the deal will be half funded out of existing cash balances (€2.7 billion as of end of March 2016) and the other half with new bridge and term loan facilities, Moody's said it believes that following the significant deleveraging achieved in the past three years, Evonik enjoys sufficient financial flexibility to fund this acquisition, while maintaining financial metrics supportive of a Baa1 rating.

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