Moody's raises Kemet to positive, rates notes Caa1

Moody's Investors Service said it changed Kemet Corp.'s outlook to positive from stable, assigned a Caa1 (LGD4) rating to its new senior secured notes due 2019 and affirmed its corporate family rating at Caa1, probability of default rating at Caa1-PD, speculative grade liquidity rating at SGL-4 and senior secured bonds due 2018 at Caa1.

The proceeds of the new notes will be used to repay Kemet's $374 million of existing 10˝% senior notes due 2018 and for financing costs.

The change to a positive outlook reflects Moody’s expectation that Kemet's profitability will improve over the next year as the company begins to capture the benefit of the past several years of restructuring and vertical integration activities. Moreover, the agency said the refinancing should result in a modest improvement in Kemet's interest burden and pushes out Kemet's largest block of debt by a year, which improves Kemet's liquidity and financial risk profile.

The Caa1 corporate family rating and SGL-4 speculative grade liquidity rating reflect the agency’s belief that a liquidity pressure could emerge over the next year as Moody’s expects both significant near-term financial liabilities and only modest free cash flow due to the high interest burden and the company’s weak film and electrolytic segment.

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