Moody's cuts Cognis, rates note B1, loans B1, Ba2

Moody's Investors Service said it downgraded Cognis GmbH's corporate family and probability-of-default ratings to B2 from B1 and 9½% senior secured notes due 2014 to Caa1 (LGD5, 88%) from B3 (LGD5, 86%).

The agency also assigned a provisional B1 (LGD3, 44%) rating to the proposed senior secured floating-rate notes and loans and a provisional Ba2 (LGD1, 4%) rating to the proposed revolving credit facility.

This concludes the review for downgrade, which began on April 25 following the company's announcement that it was soliciting consents from 9½% noteholders to allow refinancing of its senior secured first- and second-lien obligations and a portion of the PIK notes due 2015, and the outlook is stable.

The agency said the downgrade reflects the increase in leverage and cash interest costs following the partial repayment of the PIK notes.

While the consent of the noteholders to the partial repayment of the PIK notes was secured through an one-off waiver and leaves the ring fencing arrangements restricting the upstreaming of cash from Cognis to its parent Cognis Holding GmbH in place, Moody's noted that the refinancing exercise will result in some material deterioration in the credit metrics of the rated group and that the adjusted gross debt-to-EBITDA ratio will likely remain in the 6x area for the near to medium term.

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