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Diamond (BC) B.V. -- Moody's says IPO would be credit positive for Diversey

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Announcement: Moody's says IPO would be credit positive for DiverseyGlobal Credit Research - 02 Mar 2021New York, March 02, 2021 -- Moody's Investors Service ("Moody's") stated that Diamond (BC) B.V. (Diversey's) plans for an Initial Public Offering ("IPO") do not immediately impact the company's ratings, but could become a material positive credit development for the company depending on the amount of equity issued and the amount of debt repaid from net proceeds.On March 1, 2021 Diversey Holdings, LTD., the ultimate parent company of Diversey, filed a Form S-1 registration statement with the SEC relating to an initial public offering of ordinary common stock. The filing specifies that the net proceeds from the offering will be used to reduce debt. Full details of the proposed offering, including the size of the IPO and intended share price, have not been disclosed. However, we believe that a public offering of less than half of the company's equity would generate meaningful proceeds relative to about $2.7 billion in outstanding debt reported on Diversey's balance sheet at December 31, 2021.Excluding the benefit of any prospective IPO and debt repayment, our near-term expectations for the company include adjusted financial leverage in the range of 6.0-6.5 times (Gross Debt/EBITDA), positive and improving free cash flow, and roughly $430 million of available liquidity from cash and revolver availability. We estimate retained cash flow to debt near 8% (RCF/Debt) free cash flow to debt near 3% (FCF/Debt) and adjusted financial leverage in the low-to-mid 6 times range for the twelve months ending December 31, 2021. We could upgrade the rating with expectations for adjusted financial leverage sustained below 5.5 times and positive free cash flow, both with a favorable trajectory, and if liquidity remains adequate.On November 10, 2020, Moody's affirmed the Corporate Family Rating (CFR) of Diversey at B3 but changed the outlook to stable from negative. The stable outlook reflects the restoration of positive free cash flow through both improved earnings and reduced collective cash usage for transitioning to freestanding status following the separation from Sealed Air in 2017, and the reduction in other cash usage for restructuring, new business wins and net acquisition costs. The change to a stable outlook also reflects the improving EBITDA trend and a more favorable outlook arising from management actions as well as COVID related tailwinds and new business opportunities.Headquartered in Fort Mill, South Carolina, Diversey is a global supplier of cleaning, hygiene, sanitizing products, equipment and related services to the institutional and industrial cleaning and sanitation markets. The company generated approximately $2.6 billion of sales in 2020. Diversey is a portfolio company of Bain Capital.This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. Joseph Princiotta Vice President - Senior Analyst 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 Glenn B. Eckert 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 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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