Moody’s could lower Kraton

Moody's Investors Service said it placed Kraton Performance Polymers, Inc.’s Ba3 corporate family rating under review for downgrade.

The review was prompted by the company's announcement that it entered into a definitive agreement to acquire Arizona Chemical Holdings Corp. (Ba3, under review for downgrade) in a transaction valued at about $1.37 billion.

The company proposed a capital structure of $1,775,000,000 in new debt issuance, which would refinance the outstanding debt at both entities. Additionally, Kraton's $250 million ABL revolving credit facility would be replaced with a new $250 million ABL facility. The acquisition is subject to regulatory approvals and is expected to close by the end of 2015 or beginning of 2016.

Kraton's speculative grade liquidity rating was affirmed at SGL-2.

The review reflects the expected increase in Kraton's leverage following the acquisition of Arizona Chemical due to the significant increase in debt, Moody’s said. Kraton estimates that the Arizona Chemical transaction value represents an adjusted 7.4 times multiple for the last 12 months ending June 30, or 5.5 times including synergies.

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