Moody's cuts Gildemeister outlook to negative

Moody's Investors Service said it changed the outlook on Gildemeister AG's Ba3 corporate family rating, B2 €175 million senior subordinated notes due 2011 and B3 issuer rating to negative from stable.

The change in outlook reflects Moody's concerns regarding the company's operating performance and cash flow metrics, which have been below the rating agency's expectations, particularly given the positive stage of the industry cycle. Margins have been negatively impacted by the intense competition and by rising raw material costs.

With adjusted total debt to EBITDAR approaching 5x for the last 12 months ended Sept 30, financial leverage is viewed as high. Moody's said cash flow generation is weak and there is the potential for future cash flow to be constrained by the resumption of dividend payments combined with discretionary capex (e.g. on new facilities). Furthermore, in order to maintain its technological expertise, the company must continue to invest in research and development, which will continue to impact cash flows.

More positively, the agency said Gildemeister's ratings are underpinned by the company's position as a leading global supplier of metal-cutting machines tools.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.