InterviewMore chemical bankruptcies likely - Moody’s

20 January 2009 20:51  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--The North American chemical industry is more highly leveraged than it was in previous downturns and more bankruptcies are likely this time, a Moody’s Investor Service analyst said on Tuesday.

“Relative to prior downturns, there are many more high yield companies in North America, so there are bound to be more bankruptcies,” John Rogers, head of the chemical group at Moody’s, told ICIS news.

Out of 75 North American chemical companies under coverage by Moody’s, 54 are in the high-yield (elevated leverage) category - more than double the 26 at the end of 2001.

Certain companies will be under high pressure to refinance in 2009 under difficult market conditions, he added.

“There are several companies that are very stressed and that will need to refinance or seek waivers to their credit agreements over the next 12 months. These include Aventine Renewable Energy, Georgia Gulf, Kraton Polymers, Omnova Solutions, Chemtura and Arclin,” said Rogers.

NOVA has $250m (€190m) in debt coming due in April, while Chemtura has $370m in debt maturing in July.

The stock prices of Aventine, Omnova and Chemtura have tumbled over the past several weeks to under $1 as investors assigned them a higher risk of bankruptcy.

Other companies that will be stressed but unlikely to go bankrupt include Dow Chemical, Ferro, Avery Dennison, Huntsman, Hexion, Momentive Performance Materials, Solutia and Ashland, he added.

“People are looking at chemicals differently now. I think the high-yield market may be more difficult for chemicals than other sectors like oil and the consumer sector,” he said.

“There is so much uncertainty over chemical earnings throughout 2009 - how low we go, and what the future prospects will look like,” Rogers added.

($1 = €0.76)

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By: Joseph Chang
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