Compass Minerals Group Lands B1 Rating; Dealers Scarf Up Paper

  • 08 Dec 2001
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Compass Minerals Group's $135 million revolver, a deal which closed nearly two weeks ago and has since become a new favorite in the secondary market, has been assigned a B1 rating from Moody's Investors Service. The debt has traded up to 100 3/4. A market player noted a big appetite for new issue has supported levels and made sellers hard to find despite uncertainties for the company considered in the rating. The rating assignment is due to the effect of weather conditions on demand for road salt deicing, according to Diane Vargas, v.p. and senior credit officer. She notes that mild winters result in earnings fluctuations. Salt deicing comprised approximately 39% of 2000 net sales after shipping and handling and 57% of EBITDA. Vargas also considered the seasonal nature of the deicing business. Proceeds from the credit facility will be used to finance the acquisition of the salt business from IMC Global.

The rating also reflects Moody's belief that in a distressed situation the collateral value may not cover the outstanding borrowings, given that a substantial portion of sales and assets are attributed to foreign subsidiaries that will not fully guarantee nor provide collateral for the credit facility. "In order to notch up the senior implied rating for secured bank debt, it is necessary for the value of the collateral in distress to cover the outstanding loans," said Vargas. "Typically foreign subsidiaries do not provide guarantees of all their subsidiaries nor provide a security interest in all of their assets due to tax implications."

A plus for the credit is the company's leading market positions. Compass has approximately 30% of total North American salt production, 55% of U.K. salt production, and about 56% of North American sulfate of potash (SOP) production. The ratings further reflect low cost operating positions in its markets due to the size and quality of its salt and SOP reserves and facilities that are located near rail or water transport.

  • 08 Dec 2001

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2 Citi 5,781 17 11.57
3 BNP Paribas 3,530 14 7.06
4 Credit Suisse 2,783 8 5.57
5 Rabobank 2,633 4 5.27

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