8th Jul 2019 17:41
(Alliance News) - Moody's Investors Service on Monday affirmed the Ba2 corporate family rating of Synthomer PLC, but changed its outlook to negative from stable.
"Synthomer's announced acquisition of OMNOVA Solutions Inc is a good strategic fit and improves the company's scale and geographic diversification. However, the acquisition will result in Synthomer's leverage exceeding our guidance for the Ba2 rating and we expect that the company's leverage will remain elevated until 2021," said Sven Reinke, a senior vice president & lead analyst for Synthomer.
The affirmation of the Ba2 rating takes into account Synthomer's continued commitment to lowering net leverage and the company's strong historic track record of integrating acquired
businesses, Moody's said.
On Wednesday last week, the aqueous polymers supplier said it will buy OMNOVA, a US-based
specialty chemicals company, for an enterprise value of GBP652 million which includes GBP233 million for OMNOVA's existing net debt.
Synthomer intends to finance the acquisition alongside the refinancing of its existing net debt of GBP214 million, it said, with a combination of new debt financings at an amount of GBP669 million and an equity capital increase of GBP200 million.
The ratings agency said it recognizes the strategic rationale of the announced transaction, which will enhance Synthomer's scale and geographic diversification. The transaction combines Synthomer's large European production footprint with OMNOVA's strong position in North America and production facilities in China, Moody's said.
"The change of the outlook to negative reflects the weaker financial profile and the need to deleverage at least in line with our expectations," added Reinke.
Looking ahead, Moody's said Synthomer's ratings could be upgraded if the company were to continue to improve its business profile in terms of size and profitability.
Synthomer shares closed 0.5% lower in London on Monday at 376.20 pence each.
Related Shares:
Synthomer