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Rockwood Press Release
Moody's moves Rockwood's outlook to positive
This rating action reflects both the stable operating performance and the prospect for further meaningful debt repayment. The change to a positive rating outlook incorporates our anticipation that major additional debt financed acquisitions are unlikely, and that Rockwood's remaining business lines will generate, over time, cash flow that is positive and improving relative to existing debt levels. The rating on the proposed amended facilities assumes that they are closed under the proposed terms as presented to us and we will monitor the transaction and review the closing documents. "The positive outlook reflects our assumption that excess free cash flow is likely to be used for debt reduction and that these proposed timely amendments to the senior credit facilities will, if approved, be a credit positive and improve liquidity." said Moody's analyst Bill Reed. Ratings Assigned:
Outlook Actions:
LGD adjustments
The B1 CFR is supported by Rockwood's size, various leading market positions, and its diversity of products, end markets, and customer base. The top ten customers account for approximately 8% of net sales (while no single customer accounts for more than 2% of sales) and the largest end-use market represent approximately 17% of net sales. Additionally, we take comfort in Rockwood's limited exposure to volatile petrochemical and energy costs as well as its broad base of raw materials in which no single material contributes more than 1.7% to cost of goods sold. Moody's also recognizes that management successfully remediated the material weaknesses in its internal control over financial reporting relating to issues in 2004, 2005 and 2006. We view this as a positive development, as the material weaknesses had been viewed as a significant negative to Rockwood's credit profile. In addition, while Rockwood is a public company we note that 30% of the equity is held by the initial LBO sponsor, with an additional 9% of the equity held by another private equity firm, and management controls an additional 6% of the outstanding shares resulting in substantial influence over the election of future board directors and company policies, not withstanding, the presence of only two sponsor representatives on the seven person board of directors. A final concern centers on the existing leverage covenant in the senior secured credit facilities. In the event that the proposed amendment is not completed, we anticipate that the room under this covenant could become tight over the next eight quarters and possibly result in negative pressure on the outlook or rating. Moody's most recent announcement concerning the ratings for Rockwood was on December 8, 2006 when the B1 CFR was affirmed and the outlook was moved to stable from negative. The principal methodology used in rating Rockwood was Moody's Global Chemical Industry rating methodology, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory (February, 2006, document #96180). Other methodologies and factors that may have been considered in the process of rating these issuers can also be found in the Credit Policy & Methodologies directory. Rockwood Specialties Group, Inc., headquartered in Princeton, New Jersey, is a global producer of a variety of specialty chemicals and materials, including pigments, additives, specialty compounds, ceramics, and electronics for use in businesses ranging from life sciences to automotive manufacturing. Rockwood operates through the following three business sectors: Specialty Chemicals, Pigments and Additives, and Advanced Materials. Revenues were $3.2 billion for the LTM ended March 31, 2009. New York New York
CREDIT RATINGS ARE MOODY'S INVESTORS SERVICE, INC.'S (MIS) CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MIS DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. CREDIT RATINGS DO NOT CONSTITUTE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS ARE NOT RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. CREDIT RATINGS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MIS ISSUES ITS CREDIT RATINGS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE. © Copyright 2009, Moody's Investors Service, Inc. and/or its licensors including Moody's Assurance Company, Inc. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY'S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY'S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided "as is" without warranty of any kind and MOODY'S, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances shall MOODY'S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY'S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY'S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings and financial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY'S IN ANY FORM OR MANNER WHATSOEVER. Each rating or other opinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. MOODY'S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY'S have, prior to assignment of any rating, agreed to pay to MOODY'S for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,400,000. Moody's Corporation (MCO) and its wholly-owned credit rating agency subsidiary, Moody's Investors Service (MIS), also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually on Moody's website at www.moodys.com under the heading "Shareholder Relations - Corporate Governance - Director and Shareholder Affiliation Policy." |
New York, USA (June 2, 2009) — Moody's Investors Service affirmed the debt ratings of Rockwood Specialties Group, Inc. (Rockwood — Corporate Family Rating B1 CFR) and revised the ratings outlook to positive from stable. Moody's also assigned Ba2 ratings to Rockwood's proposed amended senior secured credit facilities including its revolver and term loan facilities (see list below). Among other changes the amendment is designed to relax a leverage covenant and extend maturities by two years.
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