Trinseo to draw down $100 million under its revolver

By Rebecca Melvin

New York, April 1 – Trinseo SA will draw down $100 million under its $375 million revolving credit facility as a precautionary step in light of uncertainty related to the Covid-19 pandemic, the company said in a press release.

There were no amounts previously outstanding on the revolver or on its $150 million accounts receivable securitization program, the company said.

Also due to the uncertain demand outlook caused by Covid-19, Trinseo is withdrawing its previously issued 2020 full-year financial guidance.

Other steps the company is taking to cushion itself against market uncertainty is to reduce anticipated capital expenditures for 2020 to between $80 and $85 million from $100 million.

Trinseo said it has no maintenance covenants on its debt agreements and only a springing covenant on its revolver, subject to a first-lien net leverage ratio not to exceed 2x, which applies when 30% or more is drawn from the facility at the end of a financial quarter. As of year-end 2019, its first lien net leverage ratio was 0.7x.

The company expects to end the first quarter with about $425 million of cash, which excludes the $100 million revolver drawdown that will be received early in the second quarter. In addition, it expects to have a release of working capital in the second quarter of over $100 million due to declining feedstock prices and inventory management.

After a strong start to the year, weaker business conditions started to emerge in mid-March, particularly in the automotive and tire markets, the company said. However, there has been relative strength in polystyrene and latex binders into food packaging applications as well as performance plastics into medical applications.

Trinseo has been able to continue operations at all of its manufacturing locations other than its API Plastics site in Italy, which is complying with a government mandated closure of all non-essential commercial activities in that country. The procurement and supply chain teams continue to develop contingency plans in the event of a significant disruption or shutdown so that customer demand can continue to be met with timeliness and quality.

In March, the company initiated a consultation process regarding the disposition of its styrene monomer assets in Boehlen, Germany, and its polybutadiene rubber (nickel and neodymium-PBR) assets in Schkopau, Germany. The combined adjusted EBITDA of these operations in 2019 was about negative $18 million. Trinseo continues to be committed to its other operations at the Schkopau site, including polystyrene, SSBR, and ESBR.

Trinseo is a Berwyn, Pa.-based materials solutions provider and manufacturer of plastics, latex binders and synthetic rubber.

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