Moody’s gives Ba3 to Taghleef, loans

Moody's Investors Service said it assigned a corporate family rating of Ba3 and a Ba3-PD probability of default rating to Taghleef Industries Topco Ltd.

The agency also assigned Ba3 instrument ratings to the new senior secured $325 million equivalent term loan and $80 million equivalent revolving credit facility, borrowed at Taghleef BV and other subsidiaries.

The outlook is stable.

Moody's said it views the Ba3 rating as weakly positioned, reflecting (a) the focused product portfolio on BOPP films and labels for predominantly food/beverage end markets; (b) exposure to raw material price volatility as pass-through arrangements do not cover all sales, and in fact will pressure EBITDA in 2016; (c) exposure to more commoditized products for which Taghleef needs to balance pricing pressure from large customers with volume growth; (d) the need to invest in operations to further develop value-added products to protect and improve margins, and to improve operating efficiencies, which is expected to turn free cash flow negative initially and carries some execution risk; and (e) the company's acquisitive past and room for further debt-funded acquisitions under its existing credit facilities.

The agency also noted that Moody's adjusted leverage stood at 3.6 times pro-forma for the new capital structure and as of December 2015

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