Moody's rates Millennium Inorganic loans Ba3, B3

Moody's Investors Service said it assigned B2 corporate family and probability-of-default ratings to Millennium Inorganic Chemicals, Inc. in connection with National Titanium Dioxide Co. Ltd.'s proposed acquisition of Millennium from Lyondell Chemical Co.

The agency also assigned Ba3 (LGD3, 30%) ratings to the company's $100 million guaranteed first-lien revolving credit facility due 2012 and $550 million first-lien term loan due 2014 and a B3 (LGD5, 77%) rating to its $230 million second-lien term loan due 2014.

The outlook is stable.

The total transaction consideration is about $1.146 billion, which is expected to be financed with $780 million of proceeds from the new facilities, $350 million in cash equity and $16 million of assumed debt held in Brazil. A new $100 million first-lien revolving credit facility is projected to be undrawn at close.

The agency said Millennium's ratings are constrained by limited free cash flow generation, a weakening of TiO2 supply/demand fundamentals over the intermediate term, some uncertainty over the timing of a sustained improvement to Millennium's manufacturing costs and production volumes, the single product nature of the business, significant customer concentration and the narrow financial disclosure going forward due to the lack of Securities and Exchange Commission filings.

The stable outlook is supported by Millennium's position as the second-largest global producer of TiO2, an experienced management team, large production facilities in the United States, Europe and Asia, the ability to expand higher margin non-pigment product lines and restrictive covenants in the credit facilities that limit dividends, Moody's said.

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