S&P downgrades Heckler & Koch

Standard & Poor's said it lowered Heckler & Koch GmbH's long-term corporate credit rating and €120 million notes to B- from B to reflect the intention of the group's indirect parent, Heckler & Koch Beteiligungs GmbH, to issue €100 million of additional debt in the form of pay-in-kind notes. The outlook is negative.

The downgrade reflects the very aggressively leveraged position the proposed notes will leave the group in, at 7.9x its €33.5 million EBITDA in the 12 months to Sept. 30. S&P said it is also concerned by the impact on the group of the lack of an effective counter-balance to the dominant influence, and very aggressive financial policy, of its shareholders.

The ratings on Heckler & Koch are constrained by the group's very high leverage, very aggressive financial policy, small size and relatively high level of customer concentration, the agency said. The company benefits, however, from the strength of its product portfolio and high level of technological expertise, which enables it to achieve good profitability levels.

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