Moody's may downgrade Linde

Moody's Investors Service said it kept Linde AG's A3 senior unsecured debt rating and P-2 short-term debt rating and Linde Finance BV's A3 backed senior unsecured debt rating, Baa1 backed subordinated debt rating and P-2 backed short-term debt rating on review for possible downgrade following the proposed cash offer for The BOC Group plc.

The current offer values BOC's existing share capital at about £8.2 billion. Linde has agreed to use a bridge loan to fund the transaction and the bridge facility is expected to be refinanced shortly thereafter by the issue of €1.4 billion to €1.8 billion of equity, debt capital markets instruments including hybrid bonds between €1.2 billion and €1.6 billion and remaining committed bank facilities.

The review for possible downgrade reflects the company's increased debt levels, but Moody's said it expects Linde to restore financial flexibility by divesting non-core assets after the transaction.

The agency also said it views the combination of the two businesses as complementary as it will create a world market leader in the industrial gases business with total sales of approximately €11.9 billion, with international presence in 70 countries. The enlarged group should also continue to benefit from stable cash flows, typical for the industrial gases industry.

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