TEXT-S&P:Rain CII Carbon rtg unchanged on Ruetgers bid
Oct 24 - Standard & Poor's Ratings Services said today that its rating and outlook on Rain CII Carbon LLC (RCCL; BB-/Stable/--) are unchanged, following RCCL's announcement of an acquisition of Ruetgers N.V. (unrated) that will be mostly debt funded. Standard & Poor's also views that the acquisition announcement does not immediately affect its 'BB' rating on RCCL's notes maturing in 2018.
When more information on the new debt structure is available, we will review the issue rating and existing recovery rating of '2' on the notes.
We believe the acquisition could weaken RCCL's credit measures such that its debt to EBITDA remains in the 3.5x-4.0x range over the next two years, compared with the current 2.5x. Although the leverage and cash flow metrics are likely to be stretched immediately after the acquisition, they will still remain acceptable for current rating on RCCL. We expect both RCCL and Ruetgers to have positive free cash flows and the ability to lower debt.
The acquisition, however, will expand RCCL's geographic diversification and give the company a significant footprint in the coal tar business, diversifying away from RCCL's calcined petroleum coke business. RCCL and Ruetgers share a fair amount of similarities and both of them have strong market shares in their respective businesses.