Moody's eyes MKS for downgrade

Moody's Investors Service said it placed MKS Instruments, Inc.'s ratings, including the Ba1 senior secured term loan rating, on review for downgrade.

This action follows the announcement that Atotech Ltd.’s board agreed to MKS' proposal to acquire Atotech in a cash and stock transaction. The SGL-1 speculative grade liquidity rating remains unchanged.

The cash portion of the purchase price will be funded with a combination of balance sheet cash and about $3 billion of new senior secured term loans. Moody's said it anticipates MKS will assume Atotech's debt.

“The mix of common equity in the consideration, at approximately 40% of the purchase price, is credit positive, since this limits the leveraging impact of the acquisition. Still, despite the large equity component, the high purchase multiple results in a leveraging acquisition, increasing debt to EBITDA from 1.6x (12 months ended March 31, 2021, Moody's adjusted) to about 5.8x (pro forma combined 12 months ended March 31, 2021, excluding synergies, Moody's adjusted), or about 5.5x including anticipated cost synergies ($50 million to be achieved over 18 to 36 months),” the agency said in a press release.

Moody’s said the review will focus the strategic rationale, the integration plan and expected synergies, plans to deleverage, any conditions for regulatory approval, details on the new term loans and any plans to refinance Atotech debt.

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