Moody's upgrades Harsco loan, rates notes Ba2

Moody's Investors Service said it affirmed Harsco Corp.'s Ba1 corporate family rating, Ba1-PD probability of default rating and SGL-2 speculative grade liquidity rating.

Moody's also said it upgraded the existing senior secured term loan B rating to Baa3 (LGD 2) from Ba1 (LGD 3) and existing senior secured revolving credit facility rating to Baa3 (LGD 2) from Ba1 (LGD 3).

The agency also said it assigned a Baa3 (LGD 2) rating to the proposed $700 million senior secured revolving credit facility.

The existing $500 million senior secured revolving credit facility will be withdrawn upon closing of the new revolver, Moody's said.

These actions follow news that Harsco will use proceeds from the sale of its Air-X-Changers business to repay about $317 million of the term loan and $150 million of the revolver balance, the agency said.

Moody's also said it assigned a Ba2 (LGD 5) rating to the proposed $500 million senior unsecured notes offering due 2027, the proceeds of which will be used along with a revolver drawdown to finance the acquisition of Clean Earth Inc.

The combination of less secured debt and the introduction of unsecured debt in the capital structure results in a lower expected loss for the term loan and revolver and a one-notch uplift for the corporate family rating under its loss given default methodology, the agency said.

The outlook is stable.

The ratings are supported by Harsco's conservative balance sheet management and focus on debt reduction, strong free cash flow generation, diversified revenue stream, size and scale, Moody's said.

With the sale of Air-X-Changers and the acquisition of Clean Earth, Harsco moves one step closer to becoming a pure play environmental services provider, the agency said.

Harsco's debt/EBITDA will rise to 3.3x on a pro forma basis following the transactions, but is expected to decline to pre-transaction levels by 2020, Moody's said.

The decline in debt leverage is expected to be achieved through EBITDA growth and modest margin expansion, the agency said.

The ratings also consider Harsco's exposure to the global steel industry, Moody's said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.