Moody’s: Gates Global view to negative

Moody's Investors Service said it revised Gates Global LLC's outlook to negative from stable.

All other ratings were affirmed, including the B3 corporate family rating, B3-PD probability of default rating, the B2 rating on the roughly $2.7 billion senior secured facilities and the Caa2 rating on the estimated $1.3 billion senior unsecured notes.

Moody’s said the outlook change reflects the company's highly leveraged profile amidst weakening conditions in its industrial end-markets, which are likely to stay depressed.

Additionally, the timing and magnitude of an end-market recovery remain uncertain. As a result, the agency expects credit metrics to remain constrained, continuing a negative trend, including the likelihood that leverage will remain elevated.

In response to weaker demand, Gates has been implementing a number of cost cutting and restructuring actions. The company expects these initiatives to strengthen EBITDA margins and lower its leverage from the high April 2016 level of over 7 times.

If the company does not show clear progress in achieving its margin objectives and improving its leverage and coverage metrics, there could be further rating pressure, Moody’s said.

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