Moody’s ups Kemet, rates loan B3

Moody's Investors Service said it rated Kemet Corp.'s new senior secured term loan B at B3 and upgraded its corporate family rating to B3 from Caa1, probability of default rating to B3-PD from Caa1-PD and speculative grade liquidity rating to SGL-2 from SGL-4.

The upgrade follows Kemet's announced plans to use the proceeds from the term loan to call the entire amount of the senior secured notes due May 2018, and the anticipated closing of Kemet's acquisition of NEC Tokin Corp.

The outlook is positive.

Following the refinancing, the agency expects to withdraw the Caa1 rating of the senior notes.

Moody’s said the B3 corporate family rating reflects the anticipated refinancing of the senior notes, which will resolve a significant near-term liquidity risk to the company, and the anticipated closing of the acquisition of NEC Tokin.

To the extent Kemet is unsuccessful in refinancing the senior notes, the rating could be pressured.

Because Kemet is not borrowing to acquire NEC Tokin and NEC Tokin generates EBITDA and will not have any debt post-closing, the agency said the acquisition will improve Kemet’s financial leverage profile, reducing debt to EBITDA by nearly a turn from 4.4 times (trailing 12 months ended Dec. 31, 2016, Moody's adjusted) to the mid to upper 3 times level (proforma for NEC Tokin, excluding expected synergies).

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