TEXT-Fitch raises Kronos International＇s IDR to ＇B+＇
www.cnchemicals.com Time：2013-05-03 Sources of information：Reuters
Fitch Ratings has upgraded Kronos International, Inc.＇s (Kronos International) Issuer Default Rating (IDR) to ＇B+＇ from ＇B＇. A complete list of rating actions is at the end of this release.
The Rating Outlook is Stable.
Fitch＇s ratings reflect debt repayment and lower financial leverage at Kronos International, as well as Kronos Worldwide, Inc.＇s (NYSE: KRO) solid market position in the top five in the titanium dioxide (TiO2) industry. Kronos International repaid EUR121 million in senior secured notes in 2011 and total debt/EBITDA improved to 0.9 times(x) at Dec. 31, 2011 from 3.9x at Dec. 31, 2010. The ratings also reflect the recovery in the TiO2 industry and Fitch＇s expectations that EBITDA will be at least $250 million in 2012.
Worldwide TiO2 capacity declined by about 6.5% as a result of the global financial crisis. The industry is fairly concentrated with roughly 60% of the global market accounted for by the top five manufacturers. This has allowed considerable price increases by suppliers and high operating rates. The titanium feedstock industry is also highly concentrated with the top three producers accounting for about 63% of supply. As feedstock contracts have come up for re-pricing, costs have accelerated more than TiO2 prices, which has reduce margins from record levels in 2011.
Fitch expects free cash flow (FCF) generation to run about $40 million annually over the next 24 months as working capital, capital expenditures and dividends are managed to earnings. The EUR80 million revolver, expiring October 2013, together with cash balances, are expected to be sufficient to support seasonal needs. At Dec. 31, 2011, cash on hand was about $20 million and the EUR80 million revolver was fully available. Total debt was $365.1 million at Dec. 31, 2011 comprising mainly the EUR279.2 million ($360.6 million) notes due 2013. Fitch expects these to be refinanced within the year.
The revolver covenants are at the operating subsidiary level (i.e. they excluded the EUR279 million notes from the covenant calculation). Fitch expects the company to be well within the net secured debt to EBITDA maximum of 0.7 times (x) and the net debt to equity maximum of 0.50x to 1.00x.
The Stable Outlook reflects Fitch＇s view that leverage should remain below 3x over the next 12 months.
An unexpected cash burn would result in a review of the ratings for a possible downgrade. Should debt be repaid to a greater degree than is expected, the ratings would be reviewed for a possible upgrade.
Fitch has upgraded Kronos International＇s ratings as follows:
－－IDR to ＇B+＇ from ＇B＇;
－－Senior secured revolving credit facility to ＇BB+/RR1＇ from ＇BB/RR1＇;
－－Senior secured notes to ＇BB-/RR3＇ from ＇B/RR4＇.
Additional information is available at ＇www.fitchratings.com＇. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
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