CORRECTION:S&P Lowers Witco Corp Rtgs BBB+;Off Watch.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 12/5/97--Standard & Poors lowered its corporate credit, senior secured, and senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. ratings on Witco Corp. to triple-'B'-plus from single-'A'-minus. Standard & Poor's also removed its ratings on the company off CreditWatch, where they were placed Dec. 16, 1996. In addition, Standard & Poor's assigned its triple-'B'-plus rating on the company's $500 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility due 2002. These actions acknowledge the meaningful improvement in operational and financial performance achieved in 1997, but also recognize that the firm's financial profile remains subpar sub·par adj. 1. Not measuring up to traditional standards of performance, value, or production. 2. Below par in a hole, round, or game of golf. following a major debt-financed acquisition in late 1995 and sizable restructuring costs since year-end 1996. While the firm is expected to make further progress in improving operating efficiency, Standard & Poor's has concerns over prospects for competitive market conditions in the intermediate term which could hamper strategies aimed at meaningfully growing revenues and earnings in value-added niches. Thus, while key credit protection measures are expected to improve moderately over the next several years from currently mediocre levels, credit quality is unlikely to strengthen much further unless management takes positive steps to reduce debt levels. Ratings incorporate the above-average profile of Witco's specialty and diversified chemicals portfolio; expectations of a sustained improvement in financial performance as a result of the restructuring initiatives; and, management's commitment to restore a prudent financial profile. Witco's portfolio includes solid global positions in diverse specialty chemical A Specialty chemical is a chemical produced for a specialized use. They are produced in lower volume than bulk chemicals, of which petrochemicals, made from oil feedstocks, are the most common. However, both are produced in a chemical plant. market niches (over 40% of revenues are generated abroad), such as organosilicones, white oils, plastic additives and catalysts, surfactant Surfactant Definition Surfactant is a complex naturally occurring substance made of six lipids (fats) and four proteins that is produced in the lungs. It can also be manufactured synthetically. products, and oleochemicals. The high margin organosilicones business has performed well since it was acquired in 1995 for $760 million (including about $280 million of assumed debt). However, over the last few years, most of the other businesses have been underperformers. Challenges have included raw material procurement and production inefficiencies that should be addressed by the restructuring, and competitive market conditions that should be better tolerated as the company endeavors to shift more of its product mix away from commodity grades. The firm is exiting 15 of 46 manufacturing sites and reducing headcount by about 25%. A three year, $600 million capital program has modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, , growth, and environmental components which should better position the firm for profitable performance. Yet, the ability to fund these projects without increased borrowing is dependent on efforts to reduce costs and improve earnings and cash flow. A 14% improvement in operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before thus far in 1997 has supported debt reduction of over $100 million. Still, key financial measures remain weak for the rating, with funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. to total debt in the mid-20% area and debt to total capital above 50%. Heightened capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. will preclude any significant debt repayments in the intermediate term. Stronger earnings and cash flow generation, aided by declining cash outlays for restructuring-related actions, should improve funds from operations to total debt to about 40%. Debt leverage is expected to trend toward a long-term average level of 40% to 45%. The unsecured $500 million revolving credit facility has equal standing with all senior unsecured debt of the company. Consequently, its rating is the same as the corporate credit rating. OUTLOOK: STABLE Credit prospects are stabilized by the good progress made to date in achieving a meaningful reduction in operating costs operating costs npl → gastos mpl operacionales and expectations of continued meaningful progress towards attaining a solid financial profile, Standard & Poor's said. -- CreditWire CONTACT: Jim Potesky, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-1127 Thomas R Kelly, New York (1) 212-208-1944 Copyright 1997, Standard & Poor's Rating Services For more information on criteria or subscriptions: http://www.ratings.standardpoor.com Today's News On The Net - Business Wire's full file on the Internet with Hyperlinks to your home page. URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. : http://www.businesswire.com |
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