S&P cuts Hexcel to junk

S&P said it downgraded Hexcel Corp. and its unsecured notes ratings to BB+ from BBB-. The agency assigned a 3 recovery rating to the notes. The 3 recovery rating indicates a meaningful recovery (50%-70%; rounded estimate: 50%) in default.

“Hexcel’s credit metrics will likely remain weak through 2021 because of the coronavirus pandemic. The company manufactures composite structural materials, mainly for commercial aircraft (55% of 2020 revenue), and its demand has been significantly affected by the reduced build rates across all platforms at original equipment manufacturers (OEMs) Boeing Co. and Airbus S.E. (excluding the Boeing 737 MAX),” the agency said in a press release.

S&P now forecasts Hexcel’s funds from operations to debt to be in the 14%-18% range and its debt to EBITDA to be in the 4.4x-4.8x range in 2021 before improving to 20%-24% and 3.4x-3.8x, respectively, in 2022.

The outlook is negative.

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