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S&P assigns BB- to Kier, notes
S&P said it preliminarily assigned BB- ratings to Kier Group plc and its planned up to £250 million of senior unsecured notes. The preliminary recovery rating on the notes is 3. The outlook is stable.
“Kier's credit metrics strengthened in fiscal year 2023 (ended June 30, 2023), thanks to improved profitability and robust cash generation. The group demonstrated progress toward its medium-term plan and achieved a net cash position (as defined by management) while improving its profitability and cash conversion. Kier's S&P Global Ratings-adjusted EBITDA increased by 19% to £162 million, up from £136 million in fiscal 2022, due to higher revenue in its infrastructure and construction divisions, more than offsetting the impact from lower property transactions,” S&P said in a statement.
The agency also noted that “We regard Kier's narrow geographic diversity, project concentration, and modest scale as the main constraints for its credit profile. The group generated revenue of about £3.4 billion in fiscal 2023, and adjusted EBITDA of about £162 million. We project the group's sales will increase to about £3.9 billion by fiscal 2025. Although growing, this is still modest compared with similar or higher-rated peers, such as Webuild and Fluor, which are several times larger and have operations in multiple countries.”
Kier will use the new notes to refinance its capital structure. The company recently amended and extended its revolving credit facility to £150 million due in March 2027. The funds will be used to pay down, on a pro-rata basis, Kier's £75 million (equivalent) private placement notes maturing in January 2025, its recently amended and extended revolver and for general corporate purposes.
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