S&P rates PQ Performance B+

S&P said it assigned B+ ratings to Sparta Cayman 2 LP (PQ Performance Chemicals) and its planned senior secured loans. The loans’ recovery rating is 3, indicating an expectation for meaningful (50%-70%; rounded estimate: 50%) recovery in default. Sparta US Holdco LLC will be the borrower.

“Our ratings on PQ Performance Chemicals reflect the company's position as a leading producer of sodium silicates in Europe and North America, as well as its exposure to niche global specialty silica end markets. The company derives most of its revenue from silicates (61%), where their products are used in personal and industrial cleaning products, fuel-efficient ‘green’ tires, adhesives, catalysts, and construction applications,” the agency said in a press release.

Private equity firms Cerberus Capital Management LP and Koch Minerals & Trading LLC agreed to buy PQ Corp.’s performance chemicals segment and carve out a new company.

PQ Performance will obtain a $750 million senior secured term loan maturing in seven years, and a $125 million revolving credit facility (expected to be undrawn at close) will fund the transaction. The firms will add $400 million in common equity to help fund the deal.

The outlook is stable, reflecting the view that EBITDA will rebound in 2021, driven by higher volumes in the company's silicates segment and cost savings initiatives, S&P said.

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