Company News
December 10, 2023
Winter is Coming
“Winter Is Coming” For Leveraged Companies
by Tyler Durden
Friday, Dec 08, 2023 – 12:45 PM
Earlier in the year, as regional banks faced a domino effect of failures, Bank of America strategist Michael Hartnett pointed out that every Fed tightening cycle has historically resulted in a crisis.
Given that the Federal Reserve hasn’t allowed a real credit cycle since the early 2000s, prolonged monetary tightening suggests that “winter is coming” for leveraged companies.
“The whole market and companies have been living in this la la land, this fake world of wealth of quantitative easing where you can borrow at 1% or 2%, you can buy anything, you can make lots of mistakes and you’re not going to get called out,” said Paul Horvath, chief executive officer at investment firm Orchard Global.
Horvath, speaking at the Milken Institute’s Middle East and Africa Summit in Abu Dhabi this week, was quoted by Bloomberg. He warned: “Winter is coming, and I don’t think people have enough parkas.”
The asset manager head said financial markets are holding up well so far, given the high rates. He noted corporates are levered up due to private equity firms buying up companies with cheap money, adding a global financial crisis might not be in the cards – but expects there will still be stress.
Bloomberg pointed out there were record levels of dealmaking during the pandemic era of cheap money. This led to a surge in private equity buyouts, backed by leveraged finance and the debt load placed on the target company. A large amount of that debt for junk-rated firms is coming due as large maturity walls approach.
Also speaking at the event was SLR Capital Partners co-founder Michael Gross, who said there is no easy solution for companies needing to refinance this debt.
“It’s going to take more than public markets coming back,” Gross said, adding, “It’s going to probably require private equity sponsors to find unique solutions like putting in more equity or finding preferred investors to step into the capital structures.”
Gross said managing portfolio companies with outdated debt structures will also face challenges for private credit funds.
He explained that funds were structured in a world of “perfection” based on an era of low interest rates, but that has all changed.
A higher for the longer environment with mounting macroeconomic headwinds only means over-leveraged firms are increasingly falling into distressed
The impact of this tightening cycle could be worse than the Great Recession – unless the Fed reverses course.
Rate traders are already pricing more than 100bps of rate cuts for 2024.
Meanwhile, Anne Walsh, chief investment officer of Guggenheim Partners Investment Management, said the US economy “hasn’t had a real corporate credit cycle since the early 2000s,” indicating a “purge is about to happen.”
https://www.zerohedge.com/markets/winter-coming-leveraged-companies
December 7, 2023
Woodbridge Seating JV in India
December 5, 2023
Woodbridge and TM Automotive Seating Systems Enter into a Joint Venture
MISSISSAUGA, Ontario, Canada & TROY, Mich., Dec. 5, 2023 – Today, Woodbridge announced it has entered into a joint venture (JV) with TM Automotive Seating Systems. The JV, to be called TMWB Foam Private Limited, will focus on delivering innovative seating systems to commercial vehicle manufacturers and buses.
“We are pleased to partner with TM Automotive Seating Systems to further strengthen our competitive position within the country,” said Bill Drury, Vice President and General Manager, Asia. “This JV combines Woodbridge’s expertise within the foam industry and TM Automotive Seating Systems’ knowledge of the Indian market to provide both companies an opportunity for growth in the commercial vehicle market.”
The JV will be located in Pune, Maharashtra, India.
About Woodbridge
With corporate headquarters in Mississauga, Ontario, Canada, and automotive headquarters in Troy, Michigan, USA, Woodbridge has more than 7,000 teammates in over 40 locations across nine countries. The company offers material technologies for automotive, commercial, recreational, packaging, healthcare, and building product applications. We provide a full complement of services, including prototyping, consulting, technical support, chemical R&D, and accredited laboratory testing.
December 6, 2023
More Drama in Distribution
Brenntag reshuffles business amid calls for full break-up
By Tristan Veyet and Matteo Allievi
December 5, 20237:40 AM ESTUpdated 2 days ago
Dec 5 (Reuters) – German chemicals distributor Brenntag (BNRGn.DE) said on Tuesday it would reorganise its business into two independent divisions from 2024 as it faces pressure from activist investors to break up the company.
The group’s shares were down 1.6% at 1012 GMT. Analysts had expected a muted share price reaction after no clear split was announced.
In the reshuffle, Brenntag’s essentials unit, a wholesale business for process chemicals, and the specialties arm, which provides services to industries such as nutrition and household products, will each have their own legal structure and leadership.
Brenntag said ahead of its Capital Markets Day event that the structural changes would give the company more options and make it ready for the next strategic steps by 2026, but did not specify what those steps might be.
“Split between two divisions is one option but there could be also other options,” CEO Christian Kohlpaintner said during a press conference.
Brenntag’s management has faced increasing pressure for a break-up of its businesses and a spin-off of the specialties unit from activist investors who have argued the separation would boost the company’s shares.
“There is really no catalyst to buy the shares unless Brenntag announces a clear split of the two divisions before 2026,” Alster analyst Thomas Wissler said.
Brenntag is the latest in a series of old and famous German companies, such as Bayer (BAYGn.DE) and Thyssenkrupp (TKAG.DE), that have been targeted by activist investors to divest part of their business to improve profitability.
As part of the reorganisation, Brenntag will transfer all pharmaceutical activities from the essentials arm to the specialties unit, while moving water treatment and finished lubricants businesses along with some semi-speciality products in the opposite direction.
As a result, the specialties division will account for 30% of the group’s gross profits, while essentials will make up the rest.
Brenntag said it aimed to grow its organic earnings before interests, taxes and amortisation by 7-9% per year until 2027, with 5-7% growth in essentials and 7-9% growth in specialties.
($1 = 0.9240 euros)
(This story has been corrected to attribute descriptions of divisions to correct business units, in paragraph 3)
Reporting by Tristan Veyet and Matteo Allievi in Gdansk; editing by Milla Nissi and Sharon Singleton
November 29, 2023
Fire in Spain Impacts Urethane Raw Material Production
Tarragona Petrochemical Plant Fire: Industry Disruption and Safety Concerns
PUdaily | Updated: November 29, 2023
On the evening of November 22 (last Wednesday), a notable fire broke out in the ethylene tank area of the northern petrochemical facility in Tarragona, Spain, operated by Repsol. This unforeseen incident may have far-reaching effects on Repsol itself as well as the neighboring facilities of Covestro and Dow Chemical in the same industrial park.
Repsol’s industrial complex in Tarragona covers multiple sectors, ranging from the production of various petroleum products to industrial and transportation fuels, making it a large-scale operation. The cause of the fire is still unclear, but the company claimed that the ignition originated from a storage tank in the cooling area of the olefin plant, leading to an ethylene leak and subsequent ignition. The occurrence of this event prompts us to reflect on whether the petrochemical industry places sufficient emphasis on safety management while striving to improve production efficiency.
Fortunately, firefighters from the company and the professional fire brigade at the industrial park responded quickly and successfully controlled the fire, avoiding casualties. This accident has raised a high level of alertness among other companies in Tarragona. Covestro and Dow Chemical quickly halted production, including multiple grades of PO and polyols production. Covestro has four production sites in Spain, one of which is located in the Tarragona industrial park where the fire occurred. This site includes an MDI facility, a hydrochloric acid hub, and infrastructures for serving other companies within the park. Dow Chemical produces a variety of products including olefins, ethylene derivatives, pyrolysis products, and octenes at its Tarragona complex.
This fire has had a significant impact on the Spanish chemical industry, testing the crisis response capabilities of various companies and causing a production stagnation in Tarragona industrial park. As one of the leading chemical companies in Spain, Covestro’s production halt will undoubtedly have a ripple effect on the entire supply chain, further affecting the supply of chemical products in the international market.
Dow Chemical’s expansion plans at its Tarragona facility and the construction of Pack Studios demonstrate their confidence in the future market. Pack Studios, equipped with state-of-the-art film production and testing capabilities, is aimed at primary, secondary, and tertiary packaging applications. Pack Studios Tarragona will drive world-leading innovations in food and industrial packaging sectors, while also providing innovative adhesive solutions for global label customers. However, the recent unforeseen fire incident serves as a reminder that safety remains the utmost concern, even in highly modern petrochemical plants. The petrochemical industry must continually enhance safety training, strengthen equipment maintenance and monitoring, and reduce the probability of accidents through technological innovations.
Repsol has stated that an investigation has been initiated to determine the cause of the fire, and companies like Covestro and Dow will assess the losses and develop response plans. This event should also prompt other chemical companies to reevaluate their own safety systems to ensure not only efficient but also stable production.
November 28, 2023
Ingevity Expands Relationship with TRiiSO
Ingevity extends partnership with TRiiSO, LLC, expands Capa® distribution
footprint for customers in the United States and Canada
NORTH CHARLESTON, S.C., Nov. 28, 2023 – Ingevity Corporation (NYSE:NGVT) today
announced an extension of the distributorship with TRiiSO LLC (TRiiSO) to expand the
distribution footprint for the company’s Capa® products from the current western
United States (U.S.) to include all the U.S. and Canada. The new agreement will broaden
capabilities to serve existing Capa customers and support growth into new markets in
North America.
“Growing our partnership will allow for wider adoption of Ingevity’s Capa technology
and improved support for existing and new applications,” said Ingevity senior vice
president and president, Advanced Polymer Technologies, Steve Hulme. “Leveraging
TRiiSO’s nationwide reach and 50-year track record of supplying the coatings,
adhesives, sealants and elastomers (CASE) market strengthens our commitment to
providing current and future customers with innovative products and best in class
technical and customer service.”
“Ingevity’s focus on providing solutions to difficult formulating challenges aligns well
with TRiiSO’s technical support strengths,” said TRiiSO, vice president, Principal
Management, Mark McBee. “We are excited to expand our business footprint with
Ingevity throughout North America for the benefit of our existing and new customers
interested in high performance specialty polyols.”
The new distributorship agreement will take effect as of December 25, 2023.
Ingevity: Purify, Protect and Enhance
Ingevity provides products and technologies that purify, protect and enhance the world
around us. Through a team of talented and experienced people, we develop,
manufacture and bring to market solutions that help customers solve complex
problems and make the world more sustainable. We operate in three reporting
segments: Performance Chemicals, which includes specialty chemicals and pavement
technologies; Advanced Polymer Technologies, which includes biodegradable plastics
and polyurethane materials; and Performance Materials, which includes activated
carbon. Our products are used in in a variety of demanding applications, including
adhesives, agrochemicals, asphalt paving, bioplastics, coatings, elastomers, lubricants,
pavement markings, publication inks, oil exploration and production and automotive
components. Headquartered in North Charleston, South Carolina, Ingevity operates
from 31 countries around the world and employs approximately 1,900 people. The
company’s common stock is traded on the New York Stock Exchange (NYSE:NGVT). For
more information visit www.ingevity.com. Follow Ingevity on LinkedIn.
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