US chem firms' finances in decent shape - bank

However, BoA identified three broad effects for the chemical producers from the credit crisis - these were slower macroeconomic growth, including potential for global recession, greater difficulty in accessing capital, even for large, highly rated companies, and near-term increases in the cost of floating-rate debt, it said.

 “Only one of our 16 companies have a debt/EBITDA (earnings before interest, tax, depreciation and amortisation) ratio above 2.5, Georgia Gulf, or two including Dow Chemical pro forma for its pending acquisition of Rohm and Haas,” the bank said.

For Georgia Gulf, Celanese, NOVA Chemicals, Airgas and PPG Industries debt accounted for more than 50% of capital structure, BoA said.

In addition, a term structure analysis revealed that most companies had small amounts of debt due this year and next, with over half of all principal due after 2012 on average, the analysts said.

The companies tended to be fixed-rate payers, which should protect them from paying substantially more in interest expense, given recent upward moves in the London interbank offered rate, or LIBOR, the bank added.

Producers had ample liquidity but the ability to roll over commercial paper was a growing concern, BoA said.

Several companies, including DuPont, Dow Chemical, Praxair and PPG, funded operations with commercial paper, which typically must be rolled at least quarterly, it said.

However, these companies and others had large revolving lines of credit and/or cash balances that would help them weather any near-term liquidity issues, the bank said.

BoA identified three broad effects for the chemical producers from the credit crisis.

These were slower macroeconomic growth, including potential for global recession, greater difficulty in accessing capital, even for large, highly rated companies, and near-term increases in the cost of floating-rate debt, it said.

BoA covers Air Products, Airgas, Albemarle, Celanese, Dow Chemical, DuPont, Eastman, FMC Corp, Georgia Gulf, Monsanto, NOVA Chemicals, PPG, Praxair, Rohm and Haas, RPM International and Westlake.

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