Moody's rates KI Holdings notes Caa2

Moody's Investors Service said it assigned a Caa2 rating to the proposed $100 million discount notes being issued by KI Holdings Inc., a newly established holding company that owns 100% of Koppers Inc.

Moody's also effectively lowered its senior implied for Koppers one notch, although the new senior implied rating of B2 was assigned to KI Holdings Inc. and the existing B1 senior implied rating for Koppers was withdrawn. The B2 rating for Koppers' senior secured (second-lien) notes was affirmed and the company's outlook remains stable.

The Caa2 discount note rating reflects the fundamental credit quality of Koppers and the risks and limitations related to the KI Holdings note issue. The discount notes are structurally subordinated to all debt and other liabilities of KI Holdings' subsidiaries and are effectively subordinated to all of Koppers' secured debt. From Moody's perspective, the proposed notes represent a nonproductive use of capital, i.e., shareholder dividends, that could instead be used to either reduce leverage or enhance operations at Koppers.

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