Fitch: Chemetall Sale Neutral to Albemarle's Current Ratings

CHICAGO--()--Fitch Ratings views Albemarle Corporation's (Albemarle) planned sale of its Chemetall Surface Treatment business to BASF for around $3.2 billion in total consideration as neutral to the company's ratings. We expect Albemarle will apply a meaningful portion of the proceeds to reducing its current debt levels (approximately $3.6 billion at March 31, 2016). This should accelerate the company's de-leveraging and bring its Fitch-calculated total debt/EBITDA ratio near the 2.5-2.8x range, which is more consistent with its 'BBB-' Issuer Default Rating (IDR), as opposed to the elevated leverage profile the company has maintained since its acquisition of Rockwood Holdings, Inc. in January 2015.

The added liquidity from the sale should also enable Albemarle to further invest in its lithium business, which Fitch views as having favorable growth prospects given projected increases in demand for consumer electronics, applications for electric vehicles and grid storage.

Fitch expects a portion of the proceeds from the sale will likely be returned to shareholders in some fashion. However, we expect that any such activity will not materially hamper the company's liquidity or ability to reach its stated leverage targets.

While Albemarle will be smaller and somewhat less diversified as a result of the sale, the company will continue to benefit from its leading, low-cost positions in bromine, lithium and fluid catalytic cracking, which are all highly concentrated markets. As a result, the company's FFO generation should remain robust, though FCF may be nominally lower owing to the loss of Chemetall's approximately $200 million in annual EBITDA and Fitch's expectations that CapEx will rise with further build-outs in the company's lithium business.

Fitch currently rates Albemarle as follows:

--Long-Term IDR at 'BBB-';

--Short-Term IDR at 'F3';

--Commercial Paper at 'F3';

--Senior Unsecured Credit Facilities at 'BBB-';

--Senior Unsecured Notes at 'BBB-'.

The Rating Outlook is Stable.

Additional information is available on www.fitchratings.com

Related Research:

Albemarle Corporate Forecasts (June 2, 2016)

Albemarle Ratings Navigator (June 1, 2016)

North American Chemicals Handbook (A Detailed Review of Companies in the Chemicals Sector)

Related Research

Albemarle Corporation - Corporate Forecasts

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882610

North American Chemicals Handbook (A Detailed Review of Companies in the Chemicals Sector)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874006

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Contacts

Fitch Ratings
David Cameli, +1-312-368-3160
Associate Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Monica Bonar, +1-212-908-0579
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
David Cameli, +1-312-368-3160
Associate Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Monica Bonar, +1-212-908-0579
Senior Director
or
Media Relations
Alyssa Castelli, New York, +1-212-908-0540
alyssa.castelli@fitchratings.com