S&P rates AZ Chem loans BB-, B-

Standard & Poor's said it assigned its BB- issue rating and 2 recovery rating to AZ Chem US Inc.'s proposed first-lien senior secured credit facilities, including a $60 million revolving credit facility and $675 million term loan. The 2 recovery rating indicates an expectation for substantial recovery (70% to 90%) in the event of a payment default.

At the same time, the agency assigned its B- issue-level rating and 6 recovery rating to the company's proposed $205 million second-lien term loan facility, indicating an expectation of negligible recovery (0% to 10%) in the event of a payment default. Ratings are based on preliminary terms and conditions.

S&P also affirmed its B+ corporate credit rating on ultimate parent company Arizona Chemical Holdings Corp.

The outlook is stable.

"The ratings on Jacksonville Fla.-based Arizona Chemical reflect the company's concentration in the niche-based pine chemicals market, where it compares favorably to competing products, and its exposure to cyclical end markets," S&P credit analyst Seamus Ryan said in a news release.

The ratings also reflect the company's track record of debt-funded dividend distributions following regular debt prepayments from cash flow, which the agency said it expects to allow the company to maintain debt to EBITDA below 5x.

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