Moody’s lowers Element Materials

Moody's Investors Service said it downgraded the corporate family rating and probability of default rating to B3 and B3-PD from B2 and B2-PD, respectively, of EM Midco 2 Ltd. (Element Materials Technology). Concurrently, the agency trimmed to B2 from B1 the rating of the backed senior secured bank credit facilities borrowed by Element Materials Technology Group US Holding Inc. and EM Bidco Ltd. The outlook of all entities was changed to stable from negative.

In explaining the downgrade, Moody’s noted Element’s weaker-than-expected performance and weak credit metrics and limited cash flow generation.

However, the agency said it considers the equity injection from its majority shareholder credit positive though insufficient to lower Element’s leverage to under 7.5x in 2024.

“The stable outlook reflects Moody's expectation that the company will grow its EBITDA and de-lever; however, it is expected that Moody's-adjusted debt/EBITDA will remain in excess of 6.5x over the next 12-18 months,” the agency said in a press release.

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