Engineering Materials Producer SCUR-Alpha 1503 GmbH Rated Preliminary 'B'; Outlook Stable; TLB Rated Preliminary 'B+'

Private equity firm Advent International and specialty chemicals company Lanxess AG are forming a global engineering materials producer (Champion) with about €3.8 billion of sales in 2022 by combining the acquired DSM Engineering Materials (DEM) with Lanxess' high performance materials business (HPM). The transaction will be funded by a €2.9 billion proposed senior secured term loan B (TLB), €676 million of payment-in-kind (PIK) notes, and €200 million of preferred equity certificates (PECs) to be provided by Lanxess, the latter of which will be used to strengthen the company's liquidity. We view the initial capital structure as highly leveraged, with adjusted debt to EBITDA estimated at almost 9.0x in 2023 (roughly 8.5x without PECs). We assigned our preliminary 'B' long-term issuer

...March 30, 2023 - Private equity firm Advent International and specialty chemicals company Lanxess AG are forming a global engineering materials producer (Champion) with about 3.8 billion of sales in 2022 by combining the acquired DSM Engineering Materials (DEM) with Lanxess' high performance materials business (HPM). - The transaction will be funded by a 2.9 billion proposed senior secured term loan B (TLB), 676 million of payment-in-kind (PIK) notes, and 200 million of preferred equity certificates (PECs) to be provided by Lanxess, the latter of which will be used to strengthen the company's liquidity. - We view the initial capital structure as highly leveraged, with adjusted debt to EBITDA estimated at almost 9.0x in 2023 (roughly 8.5x without PECs). - We assigned our preliminary 'B' long-term issuer credit rating to Champion's holding company SCUR-Alpha 1503 GmbH and preliminary 'B+' issue rating to the proposed senior secured loans. - The stable outlook reflects our expectation of moderate...

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