PLEASE READ AND SCROLL DOWN!
By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..
Terms of One-Time Website Use
1. Unless you have entered into an express written contract with www.moodys.com to the contrary and/or agreed to the Terms of Use at www.moodys.com or ratings.moodys.com, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.
2. CREDIT RATINGS AND MOODY’S MATERIALS FOUND ON WWW.MOODYS.COM OR SITES OTHER THAN RATINGS.MOODYS.COM MAY NOT BE DISPLAYED IN REAL TIME. FOR REAL-TIME DISPLAYS OF CREDIT RATINGS AND OTHER INFORMATION REQUIRED TO BE DISCLOSED BY MIS PURSUANT TO APPLICABLE LAW OR REGULATION, PLEASE USE RATINGS.MOODYS.COM.
3. You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities. Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision. No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.
4. To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.
5. You agree to read and be bound by the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.
6. You agree that any disputes relating to this agreement or your use of the Information, whether in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.
New York, October 25, 2022 — Moody’s Investors Service (“Moody’s”) affirmed the A3 senior unsecured rating of Ecolab Inc. ("Ecolab"), the P-2 commercial paper rating at Ecolab and other issuers and changed the rating outlook to negative from stable. The revision of the outlook to negative reflects weaker than expected credit metrics following the Purolite acquisition and a delay in bringing leverage metrics commensurate with the rating until 2024. The company has implemented price increases and energy surcharges which should support earnings growth in the second half of 2022 and likely in early 2023 and allow the company to delever. However, slower economic growth, particularly in Europe where the company generates about 20% of sales, and negative impact from currency translation (more than 50% of sales are outside of the U.S.) will likely offset benefits from pricing actions, resulting in weaker credit metrics for longer.
Affirmations:
..Issuer: Ecolab Inc.
…. Commercial Paper, Affirmed P-2
….Senior Unsecured Commercial Paper, Affirmed P-2
….Senior Unsecured Regular Bond/Debenture, Affirmed A3
..Issuer: Ecolab Lux 1 S.A R.L.
….Gtd Senior Unsecured Commercial Paper, Affirmed P-2
..Issuer: Ecolab LUX 2 S.A R.L.
….Gtd Senior Unsecured Commercial Paper, Affirmed P-2
..Issuer: Ecolab NL 10 B.V.
….Gtd Senior Unsecured Commercial Paper, Affirmed P-2
..Issuer: ECOLAB NL 11 B.V.
….Gtd Senior Unsecured Commercial Paper, Affirmed P-2
Outlook Actions:
..Issuer: Ecolab Inc.
….Outlook, Changed To Negative From Stable
..Issuer: Ecolab Lux 1 S.A R.L.
….Outlook, Changed To Negative From Stable
..Issuer: Ecolab LUX 2 S.A R.L.
….Outlook, Changed To Negative From Stable
..Issuer: Ecolab NL 10 B.V.
….Outlook, Changed To Negative From Stable
..Issuer: ECOLAB NL 11 B.V.
….Outlook, Changed To Negative From Stable
RATINGS RATIONALE
Ecolab’s credit profile reflects the company’s leading market positions in the commercial cleaning and sanitation market, strong competitive positions in water treatment and process chemicals for industrial and institutional applications. The credit profile is further supported by recurring revenue base (90% of sales are from consumable products) and significant barriers to entry such as installed equipment, on-site technical service requirements, patents and long-term customer relationships. Ecolab benefits from geographic, customer and end-market diversity and long-term growth prospects driven by customer commitments to reduce their water or carbon footprint.
The credit profile is tempered by event risk associated with the company’s M&A activity that occasionally stresses the balance sheet and results in credit metrics weaker for the rating (Moody’s adjusted Debt/EBITDA of 3.4x in the twelve months ended June 2022). Credit metrics are elevated following the $3.7 billion acquisition of Purolite at the end of 2021 and weaker operating performance due to raw material cost increases.
Ecolab is expected to have excellent liquidity, supported by cash generation and availability under its revolving facility. The company had $125 million of cash on hand as of June 30, 2022, of which $92 million is held outside of the U.S., plus a $2 billion credit facility maturing in April 2026. The $2.0 billion credit facility supports the company’s Prime-2 (P-2) short-term rating on US and European commercial paper programs. The total amount of commercial paper under the US and European facilities cannot exceed $2 billion. The credit facility has no subsequent MAC representation requirement but has an interest coverage maintenance covenant. Moody’s expects the company to continue to meet its interest coverage covenant of 3.5x under the credit facility. The company had $604 million of commercial paper outstanding as of June 30, 2022. We expect the company to generate roughly $600 million of free cash flow (defined as CFO minus capital expenditures and dividends) in 2022. Given roughly $500 million of share repurchases completed in 2022, we do not expect a significant reduction in debt in 2022. The company has over $1.65 billion of notes maturing over the next three years: $500 million in 2023, 575 million euros in 2024 and 575 million euros in 2025. The company can generate sufficient free cash flow in each year to repay this debt.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The negative outlook reflects weaker than expected operating performance and delay in returning credit metrics in line with the rating. We could stabilize the outlook if the company demonstrates sustained improvement in earnings and credit metrics and/or reduces balance sheet debt.
The ratings could be upgraded if Ecolab were to meaningfully expand its scale and end market diversity overtime; while improving and maintaining its retained cash flow to debt above 30% and targeting net unadjusted leverage at or below 2.0x, which roughly equates to 2.4x on a Moody’s adjusted basis.
The ratings could be downgraded if operating performance deteriorates, management pursues large debt-funded acquisitions or share repurchases before demonstrating reduction in leverage. The rating could also be downgraded if leverage is sustained above 2.5x beyond 2024 and if Ecolab were to change its financial philosophy to target higher unadjusted net leverage, i.e., at or above 2.5x.
Ecolab Inc. ("Ecolab"), headquartered in St. Paul, Minnesota, in one of two global providers of commercial cleaning and sanitation, water treatment and process chemicals, servicing industrial, food, hospitality and healthcare customers in more than 170 countries. Ecolab generated revenues of $13.5 billion for last twelve months ended June 30, 2022
The principal methodology used in these ratings was Chemicals published in June 2022 and available at https://ratings.moodys.com/api/rmc-documents/389870. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For 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 on https://ratings.moodys.com/rating-definitions.
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. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.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 https://ratings.moodys.com/documents/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 https://ratings.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 https://ratings.moodys.com.
Please see https://ratings.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 issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Joseph Princiotta
Senior Vice President
Corporate Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Karen Nickerson
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
https://Moodys.ethicspoint.com
Dial 1-866-330-MDYS (1-866-330-6397)
Dial the AT&T Direct Dial Access® code for
your location.
Then, at the prompt, dial 866-330-MDYS
(866-330-6397).
