Moody's gives B2, Caa2 ratings to Clondalkin loans

Moody's Investors Service said it assigned a definitive B2 (LGD3, 41%) rating to Clondalkin Acquisition BV's $360 million first-lien term loan and a Caa2 (LGD6, 91%) rating to its $95 million second-lien term loan. The positive outlook and the B3 corporate family rating of Clondalkin Industries BV remain unchanged.

The agency said Clondalkin's B3 corporate family rating reflects its solid business profile, especially its diversified product portfolio with an increasing focus on higher-margin specialty products; strong market position in several niche markets; solid geographical diversification; good substrate diversity; and the fact that it has remained free cash flow positive over the past years despite extensive capex spending, challenges from volatile raw materials and a difficult economic environment.

At the same time, Moody's noted that pro forma for the refinancing, the debt-to-EBITDA ratio will remain elevated at more than 6 times (as adjusted by Moody's).

The positive outlook reflects the agency's expectation of gradually improving credit metrics on the back of lower restructuring charges, which Moody's said should allow Clondalkin to improve its EBITDA margin to around 10%, and continued positive though moderate free cash flow generation.

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