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Moody’s applies Caa2 to Kronos note add-on
Moody's Investors Service said it assigned a Caa2 rating to Kronos Acquisition Holdings Inc.'s proposed $235 million add-on issuance to its existing $390 million senior unsecured notes due 2023.
The company's B3 corporate family rating, B3-PD probability of default rating, B2 ratings on first-lien term loans ($850 million and $235 million), Caa2 rating on senior unsecured notes, SGL-2 speculative grade liquidity rating and stable outlook remain unchanged.
The B2 rating on the existing $235 million first-lien term loan will be withdrawn when the refinance transaction closes.
The company plans to use the proceeds from the add-on notes to repay existing $235 million first-lien term loan.
Moody’s said the B3 corporate family rating primarily reflects its high leverage (pro forma adjusted debt/EBITDA of 7 times), and the agency’s opinions that organic growth prospects are low and that management will not apply free cash flow toward meaningful debt repayment.
The rating considers Kronos' sizeable share of the U.S. private label bleach market, its position as the largest contract manufacturer for blue-chip consumer packaged goods customers, its good position in pool additives and its enhanced diversity following the Prestone acquisition.
In addition to its low growth profile, operating results may be volatile given Kronos' relatively high exposure to raw material costs.
Moody’s said it expects synergy benefits from recent acquisitions and ongoing operational improvements in all businesses to drive growth in EBITDA and together with modest debt repayment, leverage should fall toward 6.5 times in the next 12 to 18 months.
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