14 November 2003 16:04 [Source: ICIS news]
LONDON (CNI)--Credit ratings agency Moody's on Friday assigned a provisional Baa1 to a proposed debut bond issue by German specialty chemicals firm Degussa.
Degussa has not disclosed how much it plans to raise from the euro-denominated bond, but sources close to the company have indicated it would be at least Euro500m ($574m).
Moody’s confirmed the Baa1 long-term issuer rating for Degussa and assigned the firm a first-time short-term issuer rating of P-2. The outlook for the ratings is stable; the issuer rating previously had a positive outlook. Moody's said the Baa1 rating for the bond issue reflects the senior unsecured status of the notes. ?xml:namespace>
The long-term issuer rating is due to: recognition of Degussa as a leading global specialty and intermediate chemical groups with a substantial number of top three global market positions; the firm's diversification interms of product, geography and customer end-markets; its strong back-integration in a number of business lines, providing competitive cost positions; and, the company's success in achieving portfolio transformation and restructuring.
The Baa1 rating, however, considered as downsides, the following: the group’s “limited” history in its current structure; its modest cashflow/adjusted debt protection metrics; its largely private ownership by two major German firms, limiting its access to the public equity markets; and, its high dividend payout ratio.
Moody’s said it had not factored in expectations of any material debt-financed acquisitions, at least in the near-term.
The change in outlook from positive to stable reflects expectations of a longer than envisaged "trough" cycle performance by Degussa and its impact on debt protection metrics, which will be lower than originally assumed over 2003-2004.
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