Moody's rates Kraton loans Ba3

Moody's Investors Service said it assigned Ba3 (LGD 3) ratings to the amended dollar-denominated first-lien senior secured term loan and euro first-lien senior secured term loan issued by Kraton Polymers LLC and Kraton Polymers Holdings BV and guaranteed by Kraton Corp.

The company announced plans to amend its existing first-lien term loans to reprice the existing term loans, extend their maturity by three years to March 2025 and increase borrowings under the euro- denominated tranche of the term loan facility by about $100 million to $200 million and use those funds to reduce the size of the dollar denominated tranche, the agency explained.

Kraton's B1 corporate family rating, SGL-2 rating, B1-PD probability of default rating and all other instrument are unchanged.

The outlook is stable.

The proposed amendments will be net debt neutral and will reduce interest expense, Moody's said.

Also the increased financing in euros will bring its debt more in line with the proportion of its profit generated by its business operations in Europe, the agency said.

The company is well-positioned given its improved debt leverage of 4.7x in 2017 versus 5.7x in 2016, when it completed the acquisition of Arizona Chemical Holdings Corp., Moody's said.

The company achieved substantially higher earnings and free cash flow generation after realizing price increases and cost savings in 2017, the agency said.

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