Polymer Additives Holdings Inc.

The stable outlook on Valtris reflects our expectation that the company will increase volumes as it integrates certain assets acquired (from chemical producer INEOS) in 2018. We believe organic growth will be minimal, along the lines of GDP growth, because the company remains burdened by low margins and utilization rates. Our base case assumes GDP growth of about 2% over the next year in the U.S. and 1% in the eurozone. Over the next 12-18 months, we expect credit metrics will remain appropriate for the rating. More specifically, we expect debt to EBITDA to remain 6.5x-7x and funds from operations (FFO) to debt 6%-9% on a weighted-average pro forma basis. We factored no significant debt-funded acquisitions or shareholder rewards in

...For a specialty chemical company, Valtris Specialty Chemicals has particularly low margins. These margins appear to originate from Polymer Additives Holdings Inc.'s (d.b.a. Valtris) numerous relatively low-value added product lines and low capacity utilization at its facilities. It holds a top market position in a few concentrated products. The company is No. 1 market in a very narrow niche market for chemicals such as benzyl plasticizers and biocides, and North American metallic stearates. While it leads in a few narrow products, the products cater to niche and disparate markets. The company's projected credit measures and financial-sponsor ownership are in line with our current financial assessment. We anticipate debt to EBITDA will remain 6.5x-7x....

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