Moody's rates Entegris loan Ba3, notes B3

Moody's Investors Service said it assigned Entegris, Inc. a corporate family rating of B1, probability of default of B1-PD, speculative grade liquidity rating of SGL-2.

The agency also assigned a Ba3 rating to the company's $460 million senior secured term loan and a B3 rating to its $360 million senior notes.

The outlook is stable.

Proceeds from the financing, along with cash of $389 million, will be used to fund Entegris' $1.1 billion acquisition of ATMI, Inc.

Pro-Forma for the acquisition debt and ATMI's EBITDA, debt is about 4x EBITDA (fiscal year end December 2013, Moody's adjusted).

While in line with other companies also at the B1, financial leverage is high given Entregris' exposure to the volatile demand from the semiconductor end market and the customer concentration (top three account for 25% of revenues).

The company's EBITDA margin has steadily declined over the past few years, but Moody's believes that Entegris stemmed the decline in late 2013 such that profits and will increase over the coming year with free cash flow used for debt reduction. Anticipated deleveraging is an important factor in the B1 corporate family rating, as is the expectation of strong liquidity through high cash balances and solid free cash flow, the agency said.

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