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Ashland to Refinance Senior Notes Due 2018 with New Facility

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Ashland Global Holdings Inc. (ASH - Free Report) said that its fully-owned subsidiary Ashland LLC, is planning to refinance its 3.875% senior notes due 2018.  The company is looking for obtaining fresh senior secured term loan B facility of around $600 million to retire the senior notes.

Ashland also plans to refinance the existing $800 million unsecured senior revolving credit facility with a 5-year secured senior revolving credit facility of the same amount. The company is also considering a fresh $250 million 3-year and $250 million 5-year, senior secured term loan A facilities. This will be used to finance part of consideration for pending acquisition of Pharmachem Laboratories, Inc., that was previously announced by the company.

Ashland reported a net income from continuing operations of $102 million or $1.42 per share in the second quarter of fiscal 2017, compared to net income of $87 million or $1.38 in the year-ago period.  

Barring one-time items, adjusted earnings were $1.71 per share, down 6.6% year over year. However, earnings beat the Zacks Consensus Estimate of $1.61.

Revenues increased 5.8% year over year to $1,320 million, topping the Zacks Consensus Estimate of $1,283 million. The company gained from price improvements and cost management strategies, partly offsetting the adverse impacts of foreign currency translation and higher-than-expected cost of raw materials.

According to the Chairman and CEO, William A. Wulfsohn, the company witnessed year-over-year growth in sales and volume of Specialty Ingredients as well as sales growth of Performance Materials and volume growth in Composites segments. The acquisition of Pharmachem, which is leading player in the global health and wellness industry is expected to be completed by the end of Jun 2017. The buyout will strengthen Ashland’s specialty portfolio segment in the high-margin end markets, boost its foothold in fast-growing nutraceutical end markets and also open new opportunities within flavors and fragrances.    

However, increasing raw material costs and a strong dollar in the second quarter acted as deterrents. To minimize the combined impact of incremental expense, the Ashland Specialty Ingredient (ASI) team is working to reduce costs and implement price increase.

Ashland’s another priority is to become a leading specialty chemical company by capitalizing on the highly differentiated portfolio, driving strong cash conversion and deliver top-quartile growth and margin. The proposed acquisition of Pharmachem is in sync with this strategy.

Ashland’s shares have declined 48.4% in the last three months, underperforming the Zacks categorized Chemical-Specialty industry’s gain of 1.6%.

Ashland currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the basic materials space include Kronos Worldwide Inc (KRO - Free Report) , Methanex Corporation (MEOH - Free Report) and ArcelorMittal (MT - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Kronos has an expected long-term earnings growth of 5%.

Methanex has an expected long-term earnings growth of 15%.

ArcelorMittal has an expected long-term earnings growth of 11.5%.

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