Clorox Credit Looking ‘Junky’ As Icahn Tries To Lure Buyer ~ BUSINESS

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BUSINESS;Carl Icahn is known as an activist, an investor who pushes the companies he invests in to make changes that will benefit shareholders. Those change are not always in the best interests of bondholders..

, which prompted bond research firm Gimme Credit to drop its rating on Clorox deb to sell back in February when the billionaire disclosed his stake in the bleach maker.

Gimme Credit is back with an update Friday, following a $76.50 per share takeover offer from the billionaire, which Icahn himself acknowledged is intended as a burr in the saddle of Clorox’s board that he hopes will lead to a deal with a strategic buyer. He named Procter & Gamble, Kimberley Clark, Unilever, Colgate-Palmolive and others as potential suitors. (See“Billionaire Icahn Puts Clorox In Play.”)

If Icahn’s bid — with its $12.6 billion enterprise value — is successful, Gimme Credit says, it would result in pro forma leverage of 7x, “resulting in a very junky credit.”

Even if ICahn’s ploy works and draws in a corporate bidder, Gimme Credit says “there’s also a real threat now of an LBO or of a defensive leveraging move by the company in order to remain independent. While all but one of Clorox’ bonds contain ‘Change of Control’ clauses, these are not a gilt-edged guarantee that bondholders would be made whole in any potential scenario.”

Shares of Clorox were up 9.3% Friday afternoon at $74.49, slightly below Icahn’s offer price.