Moody’s rates Emerald loans B1, Caa1

Moody's Investors Service said it assigned a B2 corporate family rating to ASP Emerald Holdings LLC and assigned B1 and Caa1 ratings to the Emerald Performance Materials LLC's new first- and second-lien credit facilities, respectively.

The outlook is negative in light of the leveraged acquisition by private equity firm American Securities from current sponsor Sun Capital.

The existing ratings assigned to Emerald Performance Holding Group LLC will be withdrawn at transaction close. The transaction is expected to close in the third quarter of 2014 and is subject to regulatory approval.

Moody’s said ASP Emerald's liquidity is primarily supported by its $75 million senior secured revolver, which is expected to be undrawn at the close of the transaction and little used thereafter. While capital expenditures have been elevated over the past two years due to planned capacity increases, cash flow will likely improve over the next two years as capital spending winds down.

The new first-lien term loan facility has a 50% excess cash flow sweep mechanism, with step-downs to 25% at 5.75x total net leverage and 0% at 5.25x total net leverage. The revolver will have a springing first-lien leverage ratio of 6.9x when drawn more than 35%, with which Emerald should be comfortably in compliance over the next 12-18 months.

The second-lien term loan facilities will not contain financial covenants.

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