CHICAGO, May 9 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
reaffirmed W.R. Grace's senior unsecured debt rating of 'BBB-' (Triple-B-
Minus) and commercial paper rating of 'D-3' (D-Three). The Rating Outlook is
Positive.
W.R. Grace's ratings reflect the company's sizable market share, customer
service and technology focus, and attractive and relatively stable margins in
the catalyst business. Offsetting factors relate to the still-cyclical nature
of the catalyst and construction chemicals markets and sizable cash outflows
related to asbestos and environmental liabilities. DCR's ratings rely on the
company's estimates of manageable cash outflows related to divested
businesses, asbestos and environmental liabilities as well as the attainment
of top-line growth and maintenance of profit margins. In evaluating Grace's
credit protection measures DCR will continue to balance the company's growth
and productivity improvements against declining, but still significant
asbestos and environmental liabilities. At this point in time the size and
uncertainty surrounding the legacy liability overhang is still a governing
credit factor.
Grace's financial results continue to reflect the company's strategy
of strengthening its core operations through productivity improvements,
cost-cutting initiatives and development of value-added products. While
excess cash flow has come from divestitures over the past few years, going
forward DCR expects excess cash flows to come via a combination of top-line
growth and improvements of already strong margins. Six Sigma and other
productivity initiatives are currently underway and are expected to continue
to produce operating margin expansion through manufacturing efficiencies.
Revenue growth is being supported by (1) small bolt-on acquisitions, which
leverage Grace's worldwide sales and marketing presence and (2) organic
growth, which is being supported by new internally developed products and
sales into a strengthening petroleum refining market.
EBITDA/Interest is expected to remain in the double-digit range and
debt/EBITDA is expected to remain below one. Currently Grace has a cash
balance of $230 million offset by borrowings of $270 million, resulting in a
low net debt balance of approximately $40 million. Grace's strong cash
position and operating cash flows will allow it to pursue acquisitions and
maintain liquidity in the face of cash outflows servicing legacy liabilities.
SOURCE Duff & Phelps Credit Rating Co.
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Omar M. Jama, 312-606-2367, jama@dcrco.com,
or Bert Bierschenk, 312-368-3210, bierschenk@dcrco.com, both of
Duff & Phelps Credit Rating Co.
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