Moody's lowers Koppers to SGL-3

Moody's Investors Service said it lowered Koppers Holdings Inc.'s speculative grade liquidity rating to SGL-3 from SGL-2 following the company's decision to postpone its $400 million offering of senior notes due 2020. Moody's also affirmed the company's corporate family rating at Ba3, its probability of default rating at Ba3-PD and Koppers Inc.’s $300 million senior secured notes due 2019 at Ba3 (LGD3). The outlook remains negative.

The agency believes that the covenant cushion will be tighter as a result of the postponed bond deal.

The Ba3 corporate family rating is principally constrained by industry-related risks that will make it difficult for the company to return credit metrics to appropriate levels following the debt-funded acquisition of some businesses from Osmose in August, the agency said. Moody's estimates financial leverage in the low 5 times on a pro forma basis for the 12 months ended Sept. 30.

Moody’s said the rating is also constrained by exposure to cyclical end markets, volatile feedstocks, weakening competitive position in several key products (competitors use an alternative feedstock), legal and environmental risks and high customer concentration.

The rating considers favorably solid operational and geographic diversity, strong market shares in some businesses, stability in demand over the cycle, a dearth of available substitutes for some key products and good liquidity, the agency said.

The negative outlook reflects the agency’s expectations for financial leverage to remain above 4 times at least through the end of 2015.

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