Moody's cuts Philipp Bros Chemicals rating on Pfizer deal

24 October 2001 17:20  [Source: ICIS news]

LONDON (CNI)--Credit ratings agency Moody's has downgraded the ratings of US privately owned company Philipp Brothers Chemicals, citing as the main reason its acquisition of Pfizer's medicated feed additives business.

The ratings have been on a review for a possible downgrade since October 2000, when Pfizer announced it is to sell the business to Philipp for $155m (Euro173m).

Moody's said the rating downgrade, which will affect approximately $100m of senior subordinated notes, reflected Philipp's continuing weak earnings trends, as well as higher leverage to fund debt-financed acquisitions, nominal equity and weaker creditor protection measures. It also downgraded Phillip's rating outlook to negative.

A significant portion of sales (38%) and operating assets (70%) come from foreign subsidiaries that do not guarantee the notes issued by Philipp, Moody's said. It added that the notes are subordinated to a substantial amount of secured debt.

Moreover, the company is subject to significant regulation by environmental, agricultural and drug authorities in each country in which it operates, and the international scope of its operations entails material working capital requirements and other costs.

On a positive note, Moody's said the ratings recognise Philipp's good market positions in several niche specialty markets, the diversification of its products, the diversification of its raw materials and the diversification of its customers.

By: Russell Ong
+44 208 652 3214

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