07 October 2008 14:51 [Source: ICIS news]
TORONTO (ICIS news)--US chemical firms’ balance sheets are generally in good shape as the credit crunch continues, Bank of America (BoA) said on Tuesday, citing its analysis of 16 producers it covers.
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.
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.
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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