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Trinseo Provides Update Regarding COVID-19 Pandemic; Withdraws Full-Year 2020 Financial Guidance

Trinseo

BERWYN, PA — Trinseo (NYSE: TSE), a global materials company and manufacturer of plastics, latex binders, and synthetic rubber, has provided details on its strong financial position and actions it is taking in response to the COVID-19 pandemic.

Frank Bozich, President and Chief Executive Officer of Trinseo, commented, “As the coronavirus pandemic has spread from China and Asia, to Europe and the Americas, Trinseo has been actively responding through our crisis management plan and adjusting our business operations accordingly. We are taking decisive action to adapt to the current conditions and are implementing a wide array of safeguards to protect the health of our people. We continue to monitor the situation daily and will take further action as needed.”

Financial and Operational Update

With a strong start to the year in January and February, weaker business conditions started to emerge in mid-March, particularly in the automotive and tire markets. However, there has been relative strength in Polystyrene and Latex Binders into food packaging applications as well as Performance Plastics into medical applications.

From a production standpoint, Trinseo has been able to continue operations at all of its manufacturing locations other than its API Plastics site in Mussolente, Italy, which is complying with a government-mandated closure of all non-essential commercial activities throughout the country. The procurement and supply chain teams continue to develop contingency plans in the event of a significant disruption or shutdown so that customer demand can continue to be met with timeliness and quality.

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Due to the uncertain demand outlook caused by COVID-19, Trinseo is withdrawing its previously issued 2020 full-year financial guidance.

Cash and Liquidity Update

Trinseo continues to maintain a strong balance sheet and has significant sources of liquidity. The Company ended 2019 with $1,195 million of debt and $456 million of cash, resulting in a net leverage ratio of 2.1x, as defined below in the note, “Reconciliation of Non-GAAP Measures.”

The Company has no significant debt maturing until September 2024 and maintains a $375 million revolving credit facility as well as a $150 million accounts receivable securitization program. Out of an abundance of caution, Trinseo gave notice to its revolving credit facility lenders of its intent to draw $100 million on this facility.

There were no amounts previously outstanding on the revolving credit facility and there is currently no outstanding balance on the accounts receivable securitization program.

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Trinseo has no maintenance covenants on its debt agreements and only a springing covenant on its revolving credit facility, subject to a first lien net leverage ratio not to exceed 2.0x, which applies when 30% ($112 million) or more is drawn from the facility at the end of a financial quarter.

As of year-end 2019, the first lien net leverage ratio (as defined in our senior secured credit agreement) was 0.7x.

The Company expects to end the first quarter with approximately $425 million of cash, which excludes the previously mentioned $100 million revolver drawdown which will be received early in the second quarter.

In addition, it expects to have a release of working capital in the second quarter of over $100 million due to declining feedstock prices and inventory management.

Mr. Bozich stated, “In this environment, we are taking aggressive actions to improve cash flow by reducing working capital, capital expenditures, and discretionary spending. We’re reducing our anticipated capital expenditures for 2020 from $100 million to between $80 and $85 million.”

Evaluation of Germany Styrene and Polybutadiene Rubber Assets

In March, the Company initiated a consultation process with the Economic Council and Works Councils of Trinseo Deutschland regarding the disposition of its styrene monomer assets in Boehlen, Germany and its polybutadiene rubber (nickel and neodymium-PBR) assets in Schkopau, Germany.

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The combined Adjusted EBITDA of these operations in 2019 was approximately negative $18 million. These steps followed a thorough analysis and pursuit of numerous alternative options for improving the financial performance and competitiveness of these facilities.

The Boehlen, Germany styrene facility has capacity of approximately 300 kilotons. Average production over the past three years was approximately 200 kilotons, below capacity due to several factors, including upstream supply issues. In 2019, production was approximately 150 kilotons reflecting the previously disclosed unplanned outages.

The Schkopau, Germany polybutadiene rubber line has capacity of approximately 30 kilotons. Trinseo continues to be committed to its other operations at the Schkopau site, including polystyrene, SSBR, and ESBR.

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