Moody's rates Tekni-Plex loans B3, Caa2

Moody's Investors Service said it affirmed the B3 corporate family rating and B3-PD probability of default ratings of Tekni-Plex Inc. and assigned a B3 (LGD3) rating to its new $535 million senior secured first-lien term loan and a Caa2 (LGD5) rating to its new $155 million senior secured second-lien term loan. The outlook is stable.

The proceeds of the new term loans will be used to refinance outstanding debt, to fund a small acquisition of an Italian manufacturer and to pay a roughly $164 million dividend to the private equity sponsor, American Securities LLC.

The agency said the B3 corporate family rating reflects Tekni-Plex's small scale relative to its main customers and some of its competitors, increasing leverage as a result of the proposed refinancing transaction and weak free cash flow metrics. Moody’s estimates that Tekni-Plex's ratio of adjusted debt to EBITDA in the 12 months ended Dec. 31 will rise to 6.3 times pro forma for the refinancing from 5.2 times currently.

The stable outlook reflects expectations that Tekni-Plex's performance will continue to improve as it integrates its acquisitions and benefits from completed growth capital projects and a new facility in Costa Rica, Moody’s said.

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