Moody’s ups OCI loan to Ba3, view stable

Moody's Investors Service said it changed the outlook for OCI Beaumont LLC to stable from negative as a result of the improved covenant compliance, changed capital structure, and a proposed buyout of its MLP units by OCI NV.

The agency also anticipates that OCI will realize some margin improvement in 2017 as better methanol prices are expected along with a stabilization of ammonia prices.

Moody's affirmed the corporate family rating at B2.

The ratings on the $440 million senior secured first-lien term loan B due 2019 were raised to Ba3 from B2 as a result of the addition of a $200 million subordinated intercompany term loan (unrated) that was used to repay $200 million of the term loan B. The reduced size and priority position of the term loan B in the capital structure elevated its recovery position.

The agency also upgraded the speculative grade liquidity rating to SGL-3 from SGL-4 due to the improved covenant terms, the option for PIK interest on the intercompany loan, and the proposed buyout of the MLP units, which would remove the MLP structure along with its variable rate distributions once effected. OCI's MLP buyout transaction is expected to close early in the second quarter of 2017.

Moody’s said the B2 corporate family rating reflects the elevated leverage of 5.8 times debt/EBITDA and compressed margins resulting from lower methanol and ammonia prices. The severe downturn in prices in 2016 will likely cause LTM leverage to rise over 6 times for the next couple of quarters as the earnings from more profitable quarters in 2015 roll off, however the agency said it expects leverage to be under 6 times by year end 2017 due to recent methanol price improvement.

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