Moody's eyes LSB Industries for upgrade

Moody's Investors Service said it placed the Caa1 corporate family rating, the Caa1-PD probability rating of default rating of LSB Industries, Inc. and the Caa1 senior secured instrument rating under review for upgrade. The outlook was stable.

The review was prompted by the company's announcement it reached an agreement to convert its redeemable preferred shares into common stock. Moody's also upgraded the speculative grade liquidity rating to SGL-2 from SGL-3.

Eldridge Industries holds about $300 million in preferred shares, which would be converted at a price of $6.16 per share. Pro forma, Moody’s said it estimates the conversion would hike Eldridge’s stake to 60% from 13%.

"Moody's always considered the preferred stock with a 14.5% dividend a constraining factor of LSB's credit profile," said Anastasija Johnson, a Moody’s vice president and senior credit officer, in a press release. "The transaction, if approved by the shareholders, will improve the capital structure, but will also result in a concentrated ownership, which may increase governance risks."

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