Moody's rates Kerr Group's loan B1

Moody's Investors Service rated Kerr Group Inc.'s proposed $205 million secured credit facility, consisting of a $30 million five-year revolver and a $175 million seven-year term loan, at B1. The ratings outlook is stable.

Proceeds from the loan will be used to partially finance the acquisition of Setco, Inc. and Tubed Products, Inc. for approximately $133 million, to refinance about $107 million of existing debt, and to fund working capital and general corporate needs. Security is a first priority perfected lien on all assets and stock of the borrower.

Ratings are constrained by the weak balance sheet pro-forma for the transactions having high financial leverage and no tangible equity, and by the execution and integration risks associated with acquiring two companies whose historical stand-alone top line growth is flat to declining and which require meaningful investment to turnaround their depressed margins and lackluster returns, Moody's explained.

Positively influencing the ratings is the combined company's leading positions throughout its niche markets, its new product development pipeline, its proven ability to meet and consistently maintain compliance with federal regulatory requirements for product quality and safety, and its exclusive muti-year supply contracts covering the majority of pro-forma revenue, Moody's added.

Pro-forma for the proposed transactions at closing, financial leverage is high with debt to EBITA at approximately 6 times and EBITA coverage of interest expense of approximately 2.4 times.

S&P rates Kerr Group loan BB-

Standard & Poor's assigned a BB- rating to Kerr Group Inc.'s proposed $205 million senior secured bank facility. The outlook is stable.

The company's below-average business position benefits from its decent market shares in relatively recession-resistant healthcare, food and beverage niches, well-established customer relationships, and attractive operating profitability, S&P said. Offsetting factors include the company's limited scale of operations, a highly fragmented industry structure, significant competition from large, globally diversified packaging suppliers and integration risks related to its acquisitions.

In June 2003, Kerr agreed to acquire the assets of Setco Inc. and Tubed Products Inc. (TPI) from McCormick & Co. for about $133 million. This transaction will more than double the company's size with pro forma revenues of about $343 million for the 12 months ended June 30, 2003.

Pro forma for the acquisitions, the company would benefit from a more diversified product mix, with closures accounting for about 40% of total revenues, bottles representing about 34% and tubes about 26%, S&P said. The company would enjoy the first or second position for products accounting for 80% of its pro forma sales, with major end markets including healthcare, food and beverages and personal care.

The relatively small and fragmented plastic closure industry is expected to maintain steady annual growth at mid-single digit rates, driven by ongoing conversion to plastic containers (from metal and glass), trends towards single-serve packaging, greater focus on convenience features, and regulations related to child-resistant and tamper-evident closures.

Pro forma for the acquisitions and completion of the proposed refinancing, Kerr will be aggressively leveraged with total adjusted debt to EBITDA of about 3.3x for the 12 months ended June 30, 2003, S&P said. Pro forma interest coverage is adequate for the rating at about 4x. Besides the proposed bank facility, the financing plan also includes $40 million of senior subordinated notes due 2011 and $35 million in equity from financial sponsor Fremont Capital Partners.

In the event of default or bankruptcy, S&P said the enterprise value would not be expected to fully cover the sizable amount of secured debt, assuming a fully drawn revolving credit facility.

Moody's rates William Energy Partners loan Ba1

Moody's Investors Service assigned a Ba1 rating to Williams Energy Partners LP's new $175 million credit facility. The outlook is stable.

Moody's said the rating considers the value of the collateral, comprising the equity of certain of WEG's subsidiaries and the upstream guarantees provided by those subsidiaries to support the obligations under the facility.

The ratings is based on WEG's Ba1 senior implied rating.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.