MOSCOW (MRC) -- Moody's Investors Service has upgraded its corporate family rating (CFR) of US-based styrenics producer Trinseo from B2 to B1, and raised its speculative grade liquidity rating to SGL-1 from SGL-2, the credit ratings agency said Tuesday.
The change was based on the company’s performance products segment improving its profitability, as well as and a more optimistic and stable medium-term outlook for styrene, Moody’s said.
"Although styrene is expected to remain a cyclical commodity over the longer term, capacity rationalization and industry consolidation over the past decade, along with changes in the propylene oxide market, provide a clear runway to sustained profitability over the next 2-3 years at a minimum," said John Rogers, Senior Vice President at Moody's. "The projected improvement in Performance Materials profitability over the next several years ensures that leverage will not rise back above 5.0x when styrene eventually falls into another trough."
Moody’s noted the CFR rating could be upgraded again if performance materials adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) is sustained above USD350m, and debt does not increase above USD1.5bn.
Conversely, the rating could be downgraded, the group said, if Trinseo "significantly increases" leverage to fund share repurchases, which would result in leverage of over 3.5x during the current styrene upcycle.
As MRC wrote before, Trinseo, a global materials company and manufacturer of plastics, latex binders and synthetic rubber, and its affiliate companies in Europe increased February prices for all polystyrene (PS), acrylonitrile-butadiene-styrene (ABS) and acrylonitrile styrene copolymer (SAN) grades in Europe. Effective as of 2 February, or as existing contract terms allow, the contract and spot prices for the product listed below rose as follows:
- STYRON general purpose polystyrene grades (GPPS) - by EUR250 per metric ton;
- STYRON and STYRON A-TECH high impact polystyrene grades (HIPS) - by EUR270 per metric ton;
- MAGNUM ABS resins - by EUR250 per metric ton;
- TYRIL SAN resins - by EUR200 per metric ton.
Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD4.0 billion in revenue in 2015, with 18 manufacturing sites around the world, and more than 2,200 employees.
MRC