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December 10, 2007 |
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TREOFAN GERMANY: Moody's Cuts Corporate Family Rating to Caa2 Moody's Investors Service downgraded the Corporate Family Rating of Treofan Holdings GmbH to Caa2 from Caa1 and changed the rating for the EUR170 million Second Lien Notes to Caa3 from Caa2. The outlook was changed to negative. Despite amendments in its main external credit facility in April and most recently in September, access to a EUR20 million incremental commitment (increasing the total availability to EUR80 million) is subject to the presentation of a three-year business plan and the issuance of a solvency opinion by an independent financial advisor. Even in the event of getting access to this incremental commitment, Moody's anticipates that Treofan will absorb cash in the fiscal year 2008 period because of: (i) a continued challenging operating environment, which makes it difficult to completely offset the rising resin and energy costs and (ii) the implementation of projects aimed to increase profitability. This could again result in a tight liquidity situation over the course of the coming twelve months. Should Treofan fail to secure access to the incremental commitment or any other external liquidity source of similar size, Moody's expects that the point in time when it may lose access to sufficient liquidity could be accelerated. Moody's has incorporated both scenarios in its view of an increased probability of default, having been the primary driver behind the decision to downgrade the ratings. The availability of assets for monetization implies that the general Loss Given Default assumption of 50% with some degree of uncertainty is still applicable for the entire group's capital structure, with the notching difference of the Second Lien Notes reflecting their subordination to the bank and other creditors. The negative outlook reflects the uncertainty until a decision regarding the commitment of the incremental credit facility will have been made by lenders. Absent the commitment this could increase the default risk, putting further pressure on the rating. The negative outlook also factors in the dependence of further ongoing support from shareholders, lenders and other third parties, such as suppliers. These changes were made: Downgrades: * Issuer: Treofan Germany GmbH & Co. KG -- Senior Subordinated Regular Bond/Debenture, Downgraded to a range of 72 - LGD5 to Caa3 from a range of 67 - LGD4 to Caa2. * Issuer: Treofan Holdings GmbH -- Probability of Default Rating, Downgraded to Caa2 from Caa1; -- Corporate Family Rating, Downgraded to Caa2 from Caa1. Outlook Actions: * Issuer: Treofan Germany GmbH & Co. KG -- Outlook, Changed To Negative From Stable. * Issuer: Treofan Holdings GmbH -- Outlook, Changed To Negative From Stable. Treofan, based in Raunheim, Germany, is a leading manufacturer of polypropylene film, which is primarily used to produce flexible packaging as well as labels for food and other consumer products. Since two ownership changes, the company went through two major restructuring programs, under one of which Goldman Sachs became majority shareholder. For fiscal year 2006 Treofan reported EUR458.5 million revenues (EUR460 million in 2005) and an EBITDA of EUR34.7 million. The operating loss was EUR1.7 million. |
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