Moody's: Cognis outlook negative

Moody's Investors Services said it changed the outlook of Cognis GmbH's ratings to negative from stable.

All ratings remain unchanged, including the B2 corporate family and probability-of-default ratings, Caa1 (LGD5) senior secured notes due 2014, B1 (LGD3) senior secured floating-rate notes and loans due 2013 and Ba2 (LGD1) revolving credit facility.

The negative outlook reflects Moody's expectation that Cognis will face a challenging environment in the short term as evidenced by the first-quarter operating conditions and that it may become increasingly difficult for the issuer to pass higher raw materials costs to its customers through price increases.

The agency said the B2 corporate family rating of Cognis continues to reflect the group's satisfactory operating performance in 2007. The company was able in 2007 to maintain solid operating profitability despite raw materials cost pressure by passing higher input costs to customers. Debt and cash flow metrics were negatively impacted, however, by €358 million of upstreamed cash to pay down PIK notes located outside of the rated group, Moody's noted.

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