Moody's lowers Kraton Polymers

Moody's Investors Service said it lowered Kraton Polymers LLC's corporate family and probability-of-default rating to B2 from B1, senior secured bank credit facility to B1 from Ba3 and senior unsecured subordinated bond to Caa1 from B3, and placed ratings under review for further downgrade following the fourth-quarter earnings announcement that reflected weaker-than-expected performance.

The agency said that while the willingness of the sponsors to work with management to provide funds to cure a covenant breech is a positive for Kraton's liquidity, the need for such a cure, reflecting weakness in the ability to generate cash flow to meet covenants, is a key credit concern.

Kraton's and the industry's margins have been hurt by unusually rapid increases in raw material prices and the difficulty in raising product prices to offset these increases, Moody's noted.

Due to margin pressures, the issuer's adjusted debt-to-EBITDA was 9.1 times.

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