S&P rates DLC BB-, loan BB

S&P said it gave a BB- issuer rating to DLC U.S. Inc. and BB issue with 2 recovery ratings to its planned $950 million first-lien term loan. The 2 recovery rating indicates an expectation for substantial (70%-90%; rounded estimate: 70%) recovery in default.

Kraton Corp. agreed to be acquired by DL Chemical Co. Ltd. in an all-cash transaction, valued at about $2.5 billion. The remainder of the deal will be funded with a $1.5 billion equity contribution.

“We expect new ownership to pursue financial policies that will remain supportive of credit metrics we view as appropriate for the BB- rating, including maintaining FFO to debt between 20% and 30%,” S&P said in a press release.

The outlook is stable. “The stable outlook reflects our expectation that post-merger Kraton's weighted average FFO to debt will remain between 20% and 30% over the next 12 months. We believe strong demand, volume growth across the company's portfolio, and pricing actions related to raw material cost inflation should lead to substantial revenue growth in 2021,” the agency said.

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