Rating Action: Moody's affirms Husky III Holding's B3 rating; outlook changed to stableGlobal Credit Research - 15 Feb 2022Toronto, February 15, 2022 -- Moody's Investors Service ("Moody's") affirmed Husky III Holding Limited's (Husky III) B3 corporate family rating (CFR), B3-PD probability of default rating and Caa2 senior PIK Toggle Notes. Moody's also affirmed the Ba3 rating on Husky Injection Molding System Ltd.'s ("Husky IMS") super priority revolving credit facility, the B2 rating on Husky IMS's secured term loan B and the Caa2 rating on Husky IMS's senior unsecured notes. Husky III's outlook was changed to stable from negative and a stable outlook was assigned to Husky IMS."The stabilization of the outlook reflects Moody's expectations that Husky III's strong order book will convert into higher revenue and cash flow in 2022. This will lead to leverage (gross debt/EBITDA) falling below 8x over the next 12 months" says Moody's analyst Dion Bate.The following ratings are affected by today's action:Affirmations:..Issuer: Husky III Holding Limited.... Corporate Family Rating, Affirmed B3.... Probability of Default Rating, Affirmed B3-PD....Senior Unsecured Regular Bond/Debenture, Affirmed Caa2 (LGD6)..Issuer: Husky Injection Molding Systems Ltd....Senior Secured 1st Lien Term Loan B, Affirmed B2 (LGD3)....Senior Secured Revolving Credit Facility, Affirmed Ba3 (LGD1)....Senior Unsecured Regular Bond/Debenture, Affirmed Caa2 (LGD5)Outlook Actions:..Issuer: Husky III Holding Limited....Outlook, Changed To Stable From Negative..Issuer: Husky Injection Molding Systems Ltd....Outlook, Changed To Stable From No OutlookRATINGS RATIONALEHusky III (B3 CFR) is constrained by: (1) high leverage which Moody's expects to be maintained in the 7x-8x range by its private equity owner; (2) increasing regulatory measures to reduce environmental pollution caused by plastics; (3) supply chain disruptions leading to longer delivery times and an inability to fully capitalize on new opportunities; and 4) narrowly-focused business with cyclical demand for its plastic injection molding equipment (20% of revenue) that is tied to consumer packaging companies investment trends.Husky III benefits from: (1) a strong order book which will drive higher sales and cash flow in 2022; (2) a strong global market position in the injection molding pre-form market which gives it primary supplier status to many of the world's largest beverage brands; (3) large installed base with good recurring revenue from parts and aftermarket services; (4) good geographic diversity; and (5) strong margins driven by sizable parts and aftermarket business and recent operational improvements.The stable outlook reflects Moody's expectation that Husky III's strong order book will translate into higher sales and operating results such that Moody's adjusted debt/EBITDA will fall below 8x over the next 12 months.Husky III has adequate liquidity. Sources total approximately $240 million compared to uses in the form of mandatory term loan repayment of approximately $26 million over the next 18 months to March 2023. Husky III's liquidity is supported by unrestricted cash of $79 million at September 2021 and expected free cash flow of around $160 million in the next 18 months. While Husky has access to its $250 million revolving credit facility it will not be available as a liquidity source from March 2023 when it expires. The revolver has no applicable financial covenant unless drawings exceed a certain threshold, at which point a first lien leverage covenant comes into effect. Moody's does not expect the covenant to be applicable in the next 18 months to March 2023. Even if the covenant becomes applicable, the headroom should exceed 30%. Husky III has limited ability to generate liquidity from asset sales.Husky III is exposed to increasing environmental and social risks stemming from the consumer and regulatory trends towards reducing the environmental impact of plastic waste and plastic packaging. The company has developed a new line of machines and molds that can handle 100% recycled plastic and the beverage industry continues to be committed to the usage of PET packaging, as well as increasing the use of recycled materials.The governance considerations include the private-equity ownership and the potential for an aggressive capital structure in comparison to public corporations, as shown by the debt-financed dividend completed in early 2020.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSAn upgrade of Husky III's CFR to B2 would be considered if the company demonstrates material growth in revenue and orders over time, and adjusted Debt/EBITDA is sustained below 6x (7.9x for 2022F) and EBITA/Interest is above 3x (1.6x for 2022F).The rating could be downgraded to Caa1 if liquidity is weak, possibly from negative free cash flow generation. A ratings downgrade could occur if adjusted Debt/EBITDA remains above 8x on a sustained basis or EBITA/Interest falls below 1x.The principal methodology used in these ratings was Manufacturing published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1287885. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Husky III is headquartered in Bolton, Ontario and is an indirect parent of Husky Injection Molding Systems Ltd, a global manufacturer of plastic injection molding equipment and related components and services for consumer products companies. Husky III is wholly owned by Platinum Equity. Husky III's revenue for the twelve months ended September 30, 2021 (LTM Q3 2021) was $1.2 billion.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. 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Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. 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As you build a nest egg, you need to understand how much income you can expect it to produce. We explore how much interest $10 million could earn. The answer is going to vary based on where you stash your savings … Continue reading → The post How Much Interest Would $10 Million Earn? appeared first on SmartAsset Blog.