Moody's ups HydroChem outlook to positive

Moody's Investors Service said it changed the outlook on HydroChem Industrial Services, Inc. to positive from stable and affirmed the company's B2 corporate family and probability-of-default ratings and B3 $150 million 9¼% senior subordinated notes due 2013 (LGD4, 60%).

The agency said the change in outlook recognizes ongoing improvements in the HydroChem's credit statistics including solid revenue growth, decreasing leverage and improving free cash flow and interest coverage in recent quarters despite increasing fuel and labor costs and other hurricane-related disruptions.

The ratings benefit from the company's position in the industrial cleaning industry, long-standing client relationships, stable underlying business, geographically diverse revenue stream, relatively small individual job size and trends toward single-vendor service relationships and centralized purchasing, Moody's said.

The ratings are constrained by the company's relatively small size, constrained long-term revenue growth prospects as the trend toward exporting U.S. manufacturing continues and large exposure to the petrochemical and refining industry, according to the agency. Rating constraints also include a high percentage of intangibles on the balance sheet, constituting about 47% of assets.

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