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Manufacturing Moody's Places W.R. Grace's Credit Rating On Review For Downgrade (BBJ Story)


Moody's Investor Services placed W.R. Grace's credit rating on review for a downgrade on Tuesday due to concerns that a recently announced acquisition "will add further stress" to the chemical manufacturer's credit metrics.


The action by Moody's comes less than a week after Columbia-based W.R. Grace reached an agreement to purchase Fine Chemistry Services, a division of Charlotte, North Carolina-based Albermarle Corp. Grace plans to pay for the $570 million deal with a combination of cash and equity.


To help finance the cash portion of the acquisition, about $300 million, Grace disclosed in a federal filing that it entered into a debt commitment letter with Goldman Sachs Bank USA, a subsidiary of the investment banking giant, to take out out a term loan under an existing credit agreement.


Grace said the purchase of Fine Chemistry Services will expand the company's pharmaceuticals portfolio, the largest and fastest-growing part of its materials technologies business. The acquisition is expected to add $160 million in full-year revenue and approximately $60 million in full-year earnings before interest, taxes, depreciation and amortization.


Moody's, in announcing the review of Grace's credit rating, did not disagree with some of Grace's reasons for doing the deal. However, the agency said Grace faces "integration risk" and noted that the company's metrics already exceed the threshold for its current Ba2 credit rating.


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