CHICAGO & SANTIAGO, Chile -- The ratings of Molibdenos Y Metales S.A. (Molymet; rated 'BBB/A (cl)') remain unchanged following today's agreement with China Molybdenum (China Moly) to purchase a 50% stake in its subsidiary, Luoyang High-Tech Molybdenum & Tungsten Material (LuoMo High-Tech). China Moly, a partly state-owned company, will own the remaining 50% of LuoMo High-Tech, which will Soccer Equipment scale be run as a joint venture.
The acquisition will help Molymet gain a foothold in the Chinese market, a key target for the company's overall growth strategy. The purchase price for the 50% ownership interest is USD37.7 million (Yuan 258 million) and is expected to be funded with cash on hand. The transaction will have a small leveraging affect on Molymet's balance sheet with net leverage increasing by 0.3 times (x) to around 1.0x from 0.7x net debt to EBITDA as of Dec. 31, 2009, still consistent with Molymet's rating category. Post-closing, liquidity is expected to remain strong with Cash to Short-Term Debt coverage at around 3.7x. In addition, Molymet also has access to available credit lines with 12 different banks totaling USD577 million.
As of December 2009, Molymet held cash and equivalents of USD251 million and total debt of USD332 million. EBITDA in 2009 was USD120 million compared to USD160 million in 2008, a 25% decrease. As a result of the financial crisis during 2009, Molymet reported revenues of USD922 million for the year, compared to USD2.5 billion in 2008. Fitch expects Molymet's revenues to increase substantially during 2010 with the three-month LME Molybdenum price for March 2010 at USD18 per lb, a Embroidered patches considerable increase on USD11 per lb seen at the end of 2009.
This purchase is consistent with Molymet's publicly stated strategy of expanding its presence in China. LuoMo High-Tech is a Chinese metallic molybdenum producer. The transaction is expected to close in June following confirmation from Molymet and China Moly's boards, and final approval from Chinese authorities.
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