Moody’s downgrades Circor

Moody’s Investors Service said it downgraded Circor International, Inc.’s ratings, including the corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD and the senior secured rating to B2 from B1. The speculative grade liquidity rating was maintained at SGL-3.

“The downgrades reflect expectations that Moody’s adjusted leverage, currently near 8x, will remain elevated through 2021 with modest free cash flow, indicative of protracted and uneven recoveries in Circor’s key end markets. Lack of a material recovery in results as seen by the third quarter 2020 EBITDA flat with early 2020 levels highlights Circor’s delayed upward trajectory. This reflects Circor’s exposure to heavy industrial markets that tend to recover later than light industrial markets. To illustrate, many industrial companies experienced a bounce back in earnings and free cash flow, from unwinding working capital, coming off the first half 2020 trough demand impact,” Moody’s said in a press release.

Debt-to-EBITDA, with standard adjustments including a $150 million underfunded pension liability, is forecasted to remain high but fall below 7x by year-end 2021 as earnings steadily increase, Moody’s said.

The outlook is stable.

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