Solutia lays out debt plans to pay for Etimex Solar acquisition; ratings agencies weigh in

Solutia lays out debt plan for buying Etimex Solar

ST. LOUIS — Specialty chemical and products maker Solutia Inc. said Tuesday it will refinance two loans worth $1.05 billion, and issue another $300 million in notes, in preparation for its planned purchase of Etimex Holding GmbH’s solar unit.

Solutia said the new loan is expected to include a $750 million term loan that comes due in 2017, and a new secured $300 million revolving credit line due in 2015. They replace debt that would have had to be repaid in 2013 and 2014.

Solutia said the $300 million in unsecured senior notes will come due in 2020.

Solutia said Monday it will buy Etimex Solar GmbH, which makes materials used in solar power products, for 240 million euros ($327 million) using a mix of cash and debt.

Standard & Poor’s Ratings Services raised its ratings on Solutia, including bumping its corporate credit rating to ‘BB-’ from ‘B+.’ The new rating is three notches below investment-grade status. It said the outlook is stable.

Analyst Paul Kurias wrote that the upgrade reflects S&P’s expectation that Solutia’s operating profits and measures of its debt will continue to improve, as they have for the past three quarters. S&P rated the $1.05 billion debt at ‘BB,’ and the $300 million in notes at ‘B+,’ both junk ratings.

Moody’s Investors Service affirmed its ‘B1′ non-investment grade corporate rating for Solutia, and revised its ratings outlook to positive from stable.

Analyst Bill Reed wrote that the positive outlook is due to Solutia’s relatively stable operating performance, including better margins. It also reflects an expectation that major acquisitions financed by debt are unlikely, and that Solutia’s other businesses will generate more cash.

Moody’s assigned ‘Ba2′ ratings to the $1.05 billion in Solutia debt and ‘B2′ for the unsecured note. The ratings are 2 notches and five notches below investment-grade status, respectively.

Solutia shares fell 11 cents to $14.38 on Tuesday.