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BASIC INDUSTRIES: Lanxess (LXSGR Baa3[N]/NR/NR): Moody’s Periodic Review

BASIC INDUSTRIES
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Further confirmation that Lanxess’ leverage is well above Baa3 levels. Their tone seems to suggest a downgrade isn’t imminent though, talking about 2026 asset sales.

  • Moody’s had LTM gross leverage at 7.4x at 3Q24 and expects close to 6x at FY24 proforma for the urethane divestment.
  • It expects further deleveraging in 2025. We estimate less than 1x turn organic, which would still leave it well above the 3.5x ratings threshold.
  • It expects the stake in Envalior will be sold in 2026 “if needed” to defend the IG rating. We think book value is around €700mn following a write down earlier this year, so could theoretically provide a further ~1.2x turns deleveraging if it were sold now.
  • Moody’s expects RCF/net debt around 13% this year, with a low to mid-teens threshold. It sees adj. EBITDA margins below 14% as another source of pressure; it’s expected to report 9.1% & 10.7% this and next year.
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Further confirmation that Lanxess’ leverage is well above Baa3 levels. Their tone seems to suggest a downgrade isn’t imminent though, talking about 2026 asset sales.

  • Moody’s had LTM gross leverage at 7.4x at 3Q24 and expects close to 6x at FY24 proforma for the urethane divestment.
  • It expects further deleveraging in 2025. We estimate less than 1x turn organic, which would still leave it well above the 3.5x ratings threshold.
  • It expects the stake in Envalior will be sold in 2026 “if needed” to defend the IG rating. We think book value is around €700mn following a write down earlier this year, so could theoretically provide a further ~1.2x turns deleveraging if it were sold now.
  • Moody’s expects RCF/net debt around 13% this year, with a low to mid-teens threshold. It sees adj. EBITDA margins below 14% as another source of pressure; it’s expected to report 9.1% & 10.7% this and next year.