Moody’s Investors Service assigned first-time ratings to Versum Materials, including a Ba2 Corporate Family Rating. Versum is currently a wholly-owned subsidiary of Air Products and Chemicals, but is expected to be spun off as a standalone entity by the end Q3/16.

Moody’s assigned Ba1 ratings to Versum’s proposed $775 million senior secured credit facilities, including an undrawn $200 million revolving credit facility and $575 million term loan, and a Ba3 rating to the proposed $425 million senior unsecured notes.

Proceeds from the transaction will be used to fund a $550 million dividend to Air Products, fund a debt-for-debt exchange of $425 million and pay transaction-related fees and expenses. Moody’s also assigned a Speculative Grade Liquidity Rating of SGL-2, indicating good liquidity to support operations in the near-term. The rating outlook is stable.

Versum generated $935 million of revenue and $308 million of management-adjusted EBITDA on a pro forma basis for the 12 months ended June 30, 2016.

“Versum will start out with adequate credit metrics for the Ba2 rating and should generate solid cash flow in 2017. Our most significant credit concerns are the sustainability of profit margins, which have increased significantly over the past few years, and management’s appetite for acquisitions as an independent company, which we believe could be necessary over a longer horizon to meet shareholder expectations,” said Ben Nelson, Moody’s vice president and lead analyst for Versum Materials.

Versum Materials employs applications technology to provide solutions to the semiconductor industry through chemical synthesis, analytical technology, process engineering and surface science. Products include high-purity process materials, cleaners and etchants, slurries, organosilanes, organometallics and equipment.