Fitch rates Cognis loans BB, B-; debt CCC+; note CCC

Fitch Ratings said it assigned a B issuer default rating to Cognis GmbH and a BB rating with a recovery rating of RR1 to the company's senior secured facilities and CCC+/RR6 ratings to its €1.744 billion cash-pay senior unsecured debt.

The agency also assigned B-/RR5 ratings to the second-lien facilities issued by Cognis Deutschland GmbH & Co. KG and its local subsidiaries and CCC/RR6 ratings to the €592 million payment-in-kind notes issued by Cognis Holding GmbH.

The ratings reflect Cognis's global leading position in care chemicals and nutrition and health, which together represent about 50% of its sales. The ratings also take into account the company's stabilizing operating performance in its remaining business segments, Fitch said.

The ratings are constrained by the company's high financial leverage as a result of the recapitalization in 2004, a lack of EBITDA improvement since then and higher cash interest costs, the agency added. These have constrained the company's cash flow and delayed its deleveraging during the last two years.

Fitch said that while the company's restructuring is not expected to result in any material outflows in the medium term, its cash-flow generation is relatively weak and would need to improve substantially before a positive rating action on the issuer default rating can be considered.

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