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Olin Corporation -- Moody's says Olin's proposed bond redemption is credit positive; no change to ratings or outlook

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Announcement: Moody's says Olin's proposed bond redemption is credit positive; no change to ratings or outlookGlobal Credit Research - 02 Mar 2021New York, March 02, 2021 -- Moody's Investors Service ("Moody's") says Olin Corporation's (Ba2 CFR; negative) action to reprice existing credit facilities and increase the size of it's delayed draw term loan by $315 million to refinance a portion of the company's 2025 Notes is a credit positive development because it will reduce the company's ongoing interest burden. However, the company's ratings and outlook remain unchanged today.Moody's expects improved earnings and cash flow generation in 2021. Our forecast assumes that Olin's management-adjusted EBITDA will improve to $900-950 million in 2021, which is lower than the company's guidance of EBITDA exceeding $1 billion and up meaningfully from $636 million in 2020. Recovery in the global economy will support improved volumes and pricing with potential upside from Olin's new commercial strategy. Moody's also expects the company will convert a much greater portion of its EBITDA into free cash flow in 2021. While the impact of the global outbreak of Coronavirus on the company's earnings, combined with a significant number of one-time items related to a past acquisition and new business wins, resulted in debt-funded cash consumption in 2020, we expect at least $250 million of free cash flow in 2021. Evidence of stronger end market conditions or commercial progress could prompt an upward revision to our forecast for earnings and cash flow.Moody's also expects Olin will be more focused on debt reduction. Olin has not reduced debt since acquiring chlor-alkali assets from Dow Chemical in 2015. The company reported $3.9 billion of debt at 31 December 2020, disclosed a $120 million payment in January 2021, and guided towards using internally generated free cash flow to facilitate further debt reduction in 2021. Management expects Net Debt/EBITDA (management-defined) to fall to the 3.0x range by the end of 2021. Meaningful progress toward reducing total debt and maintaining a lower debt balance would be a material credit-positive development.Taken together, Moody's expects meaningful improvement in key credit metrics in the coming quarters and could stabilize the outlook with further progress in that direction. Adjusted financial leverage remains high for the rating over 7 times (Debt/EBITDA; including our standard analytical adjustments) and retained cash flow-to-debt remains low for the rating at about 5% (RCF/Debt) for the twelve months ended 31 December 2020. These metrics, on a point-in-time basis, are indicative of much lower ratings. However, the company has good liquidity to support operations while credit metrics remain weak on a temporary basis and improving financial performance expected to drive substantive improvement in key credit metrics. Moody's expects adjusted financial leverage will fall toward 5 times and retained cash flow-to-debt will improve toward 10% by year-end. Moody's could stabilize the outlook before credit metrics reach these thresholds if we see some debt reduction and a clear path toward the appropriate metrics.Olin Corporation is a Clayton, Missouri-based manufacturer and distributor of commodity chemicals and a manufacturer of small caliber firearm ammunition.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.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. Benjamin Nelson VP - Senior Credit Officer 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. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. 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