A $916.7 million bid to made by Hyderabad based Rain Commodities (RCL) last week to acquire Belgian coal tar pitch maker Rutgers N.V. would not affect its credit rating, said Fitch Rating in its note today. The rating agency has “A -/ Stable” credit rating for the company.
Fitch expects that post acquisition consolidate gross leverage of the company will increase to about 3.6 times for 2012 and 2013 from 2.9 times for 2011. But says that it would be within “the negative rating guideline of 4 times.”
“Although RCL's consolidated net debt levels will increase significantly as a result of the acquisition, the asset to be acquired will be immediately EBITDA accretive and is likely to moderate the impact on consolidated leverage,” said the rating agency in its note today.
The acquisition is expected to complement the existing calcining business of Rain Group and will provide it better geographical and product diversification. Rutgers is one of the largest global producers of coal tar pitch products with plants in Germany, Belgium, Poland, Canada and joint ventures in Russia and Netherlands.
This acquisition is likely to give Rain Group better access to European and other markets. Apart from pitch products, Rutgers is also into other products like naphthalene, technical oils, resins, dispersants which is expected to expand the product portfolio and product mix of the rated entities. This acquisition will also reduce the group’s current dependence on its end-user industry, i.e. aluminium.
RCL reported revenue of Rs 2,850.7 crore for the first half of 2011-12 on a consolidated basis. The transaction is expected to be completed by the first quarter of 2012-13 and is subject to regulatory approvals.
