TRIS Rating has placed the company rating and issue ratings on Indorama Ventures PLC (IVL) on CreditAlert with a “Developing” implication, following IVL’s announcement to acquire certain businesses from Huntsman Corporation, USA (Huntsman).
IVL announced on 8 August 2019 that it had signed a definitive agreement to purchase certain integrated Oxides and Derivatives businesses from Huntsman. The purchase price is based on the enterprise value of US$2.076 billion (equivalent to about Bt64.31 billion) including pension obligations. The transaction is expected to be completed within the end of 2019, subject to regulatory approvals. IVL plans to fund the acquisition by US$1.50 billion of debt plus US$500 million of operating cash flow.
TRIS Rating views that the acquisition could enhance IVL’s business profile. IVL’s total capacity will increase by 3 million tonnes per annum (MTA) from 14.7 MTA. This transaction also enables IVL to enter into the downstream of specialty chemicals, which is expected to enhance overall margin. IVL expects that these assets will add up about US$250-US$300 million per year of EBITDA to IVL. However, IVL’s leverage is expected to increase as the acquisition is going to be funded mostly by debt. TRIS Rating estimates the transaction could raise IVL’s total debt to capitalization ratio to around 55%-60% from 52.4% at the end of June 2019. The impacts from the transaction on IVL’s financial profile still need to be fully assessed.
TRIS Rating will resolve the CreditAlert once it has completed detailed assessment the transaction’s implication on IVL’s credit profile.
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