S&P moves Bayou Topco view to negative

S&P said it changed its outlook for Bayou Topco Inc. to negative from stable and affirmed the B- ratings on the company and first-lien term loan.

“The outlook revision reflects our anticipation of negative free operating cash flow (FOCF) in fiscal 2023 and the risk that the company's cash flow generation will not turn positive in the near future. Bayou Topco's constraints stem mainly from the high carve-out spending and working capital outflows related to a spinoff process from Cardinal Health, the company's prior owner, into a stand-alone entity,” S&P said in a press release.

The company's carve-out expenses and duplicate costs in the first six months, July 1, 2022-Dec. 31, 2022, of fiscal year 2023 were about $38 million, in addition to the $91 million the company incurred in fiscal 2022.

“This is significantly higher than our prior forecast. In addition, the company experienced a large working capital outflow of about $96 million, related to the transition of trade payables accounts from Cardinal Health to Cordis ($42.5 million), as well as an increase in inventory to mitigate the supply chain disruptions ($33 million) and prepaid expenses and other current assets balance ($27 million),” the agency said.

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