Moody's rates Houghton B2, loans B1

Moody's Investors Service said it assigned a B2 corporate family and probability of default ratings to HII Holding Corp., the holding company parent of Houghton International, Inc.

The agency also said it assigned B1 (LGD 3, 32%) ratings to the company's $50 million senior secured revolver and $315 million secured term loan due 2016.

The outlook is stable.

The proposed financing transactions will refinance Houghton's existing bank debt as well as fund the acquisition purchase price of Shell's metalworking and rolling oil business, Moody's said.

The ratings reflect Houghton's elevated leverage with expected debt-to-EBITDA of about 5x for 2010, size, inconsistent free cash flow generation and exposure to cyclical end markets, such as auto and steel production, the agency said.

The ratings are supported by Houghton's competitive position as one of the largest suppliers of metal working fluids and chemicals management services, geographic and operational diversity, modest capital expenditure requirements, improving operating margins and the recent restructuring and acquisition activity that should ultimately improve the company's earnings and growth potential, Moody's said.

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