Cornerstone 2020 earnings tumble as input costs shoot up, draining cash

Cornerstone Chemical‘s earnings collapsed in 2020 amid a spike in raw material costs, leading the chemicals producer to book a cash burn for the year, according to two sources familiar with the situation.

For 2020, the Littlejohn-owned issuer brought in USD 426.3m in revenue, marking a 10% drop from the prior year, the sources said. Impacting the topline was a surge in ammonia, propylene and acrylonitrile prices, they noted. Cornerstone’s adjusted EBITDA amounted to USD 51.9m in 2020, both sources and a third source familiar with the situation added.

Looking forward, the company’s earnings are expected to face further challenges from higher propylene prices in 1Q21 after the Texas winter storms disrupted global supply of the chemical compound, the sources said.

Amid the earnings slide, Cornerstone burned through USD 48.5m of cash in 2020, the first two sources noted.

As of 31 December, leverage totaled roughly 10.2x through USD 530m of total debt and USD 51.9m of adjusted EBITDA, the sources continued. Cornerstone ended the year with USD 800,000 of cash and USD 23m of revolver availability, the first two sources added.

Cornerstone’s capital structure includes USD 450m 6.75% first lien bonds due 2024, a GBP 5.5m UK revolver, equivalent to roughly USD 7.5m, with USD 7.1m drawn on it, as well as a USD 100m US revolver with USD 70m borrowed against it, said the first two sources. The UK revolver is due 31 May 2021 and the next coupon payment on the bonds is due in August, the sources noted.

The 6.75% first lien bonds traded at 96.25 to yield 8.044% on 6 April, compared to trades around 94-95 in March, according to MarketAxess.

Cornerstone and Littlejohn did not respond to requests for comment.

2021 Debtwire

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