Fitch Affirms OMNOVA Solutions at 'B+'; Stable Outlook.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the following credit ratings for OMNOVA Solutions Inc. (OMNOVA): --Issuer default rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'B+'; --Senior secured credit facility at 'BB+, recovery rating (RR) 1' --Senior secured notes at 'B+/RR4'. The Rating Outlook is Stable. These rating actions affect $165 million in public securities and the company's $72 million senior secured credit facility. OMNOVA's credit ratings are supported by its small company size, relatively high debt level, and weak, though improving, operating performance. The company's size has declined and its product portfolio has become more limited upon the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of its roofing business in late September 2006 for approximately $40 million cash. The opportunistic sale monetized a small contributor to sales and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. while removing warranty liabilities from the balance sheet. However, Fitch notes that resulting lower revenue and earnings levels make OMNOVA more susceptible to default risk when business conditions weaken. Total debt-to-operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (unadjusted for the divestiture) remains high at 3.6 times (x) with $165 million 11.25% notes representing the majority of the outstanding debt. These notes may be refinanced in 2007 after its call date at June 1 as the company tries to reduce future interest expense. The remaining portfolio has shown mixed results in 2006 so far. The Decorative Products segment began to contribute profit, although at very low levels, while the Performance Chemicals segment exhibited weaker margin and lower profit on lower volumes. Despite weaker profitability, Performance Chemicals continues to be the company's largest contributor to earnings. That OMNOVA's stronger segment is presenting some weakness is a near-term concern. The Stable Rating Outlook reflects Fitch's view that operating performance and credit measures are expected to change modestly from current levels near term. Fitch expects Performance Chemicals to stabilize or possibly weaken if carpet demand remains weak and raw material prices soften with energy prices near term. Fitch also expects Decorative Products to weaken slightly if office vacancy rates increase in 2007 and a weaker U.S. economy stems refurbishment re·fur·bish tr.v. re·fur·bished, re·fur·bish·ing, re·fur·bish·es To make clean, bright, or fresh again; renovate. re·fur activity, resulting in slower wallcovering and laminate laminate, n a thin slice of porcelain or plastic fabricated in a dental lab, which is cemented to the front of the teeth to cover gaps, whiten stained teeth, or reshape chipped or broken teeth. demand. OMNOVA Solutions Inc. is a 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. producer based in Fairlawn, OH. The company has leading positions in styrene-butadiene latex production, vinyl wallcovering, coated fabrics and decorative laminates. For the last 12 months ended Aug. 31, 2006, the company had operating EBITDA of $50.1 million on sales of $812.2 million unadjusted for the recent divestiture. Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at 'www.fitchratings.com/recovery'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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