Moody’s ups Kraton loan, notes

Moody’s Investors Service said it upgraded Kraton Corp.'s senior unsecured notes to B2 from B3, senior secured term loan to Ba2 from Ba3, and speculative grade liquidity rating to SGL-2 from SGL-3.

Kraton used $530 million from the sale of Cariflex to redeem its senior secured dollar term loan and a large portion of its secured euro term loan. Senior unsecured notes now make up about 80% of Kraton’s total reported debt, up from about 50% at the end of 2019, Moody’s said.

“Management’s plan to repay the remaining secured euro term loans and finance the company mainly with senior unsecured debt in the future would further reduce the subordinate risk of unsecured notes versus secured debt and improve their expected recovery in a distress scenario. Hence, the expected recovery of senior unsecured debt has moved close to the corporate-wide recovery rate implied by Kraton’s B1 CFR,” the agency said in a press release.

The secured term loan upgrade reflects the expected higher recovery of the remaining €117 million

tranche term loan based on Moody’s loss given default methodology. The remaining euro tranche term loan is secured by a substantial amount of Kraton’s assets and ranks ahead of the senior unsecured notes.

Concurrently, Moody’s affirmed Kraton’s B1 corporate family rating and B1-PD probability of default rating.

The outlook remains stable.

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