Moody’s drops Ashland, notes to Ba2

Moody's Investors Service said it downgraded Ashland LLC’s corporate family rating and the ratings on its senior unsecured notes to Ba2 from Ba1.

The action was prompted by the announced $660 million acquisition of Pharmachem Laboratories Inc., expected to be mostly debt financed and increase Ashland's leverage just as it separates Valvoline from its portfolio. The transaction is expected to close mid-year 2017 subject to customary closing conditions.

The outlook remains stable.

Moody’s said the downgrades reflect the increase in the company's target leverage to under 3.5 times from roughly 3 times, as well as the mostly debt-financed acquisition, announced April 17, of Pharmachem that will increase leverage to above 4 times with leverage restoration likely to be spread over several years before recovering to the company's new target below 3.5 times (which equates to 3.5 times, including Moody's adjustments).

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