S&P rates California Holding, notes B

S&P said it assigned preliminary B ratings to Calderys intermediate parent California Holding III Ltd. and its planned $550 million of senior secured notes. The notes have a preliminary recovery rating of 3. The outlook is stable.

Platinum Equity created Calderys by merging HarbisonWalker International and the high-temperature solution business of Imerys SA. Platinum plans to refinance the company’s capital structure through the notes and a $200 million asset-based lending facility.

The agency said it projects the company producing free operating cash flow beating €50 million a year in 2023-2024. “Our view is supported by the group's limited capex needs, which are less than 3%, even including the cost of the synergy plan,” the agency said in a press release.

“Adjusted leverage is expected to gradually reduce from the 4x-4.5x forecast in 2023-2024 as EBITDA improves and synergies are realized. We expect modest growth in revenue, mainly supported by pricing initiatives and some improvement in volumes. In 2022, the company completed a new facility in Alabama for its steel customers, which should boost revenue going forward. We also forecast that EBITDA will cover interest by more than 3x,” S&P added.

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