11 November 2010 22:08 [Source: ICIS news]
HOUSTON (ICIS)--Moody’s raised its outlook on US specialty chemicals producer Ashland to positive from stable following the sale of the company’s distribution business, the investor’s service said on Thursday.
Moody’s said the $930m (€679m) sale of Ashland's distribution business to buyout group TPG Capital was a “high valuation”.
As such, the sale was a credit positive and should allow Ashland to repay debt, pay for growth programmes and increase its financial flexibility, Moody's said.
In addition, the sale of the business brought clarity to the composition of Ashland’s business portfolio, Moody’s said.
Looking ahead, Ashland’s credit ratings could be upgraded should the firm close on the sale of the distribution segment, pass through raw material cost increases in its water technologies, Aqualon and consumer markets units and further increase margins in its performance materials unit, Moody’s said.
Moreover, the cash resources accumulated by Ashland should allow it to accomplish its stated goal of bolt-on acquisitions in its Aqualon and water technologies units without significantly weakening its credit metrics, the investor’s service said.
In a bolt-on acquisition, a company typically merges the acquired business into one of its existing divisions.
Moody’s said that Ashland’s credit metrics had improved steadily over the past two years to reach investment-grade levels.
($1 = €0.73)
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