Moody’s downgrades Sequa

Moody’s Investors Service said it downgraded the ratings on Sequa Corp., including its corporate family rating to Caa2 from Caa1 and probability of default rating to Caa2-PD from Caa1-PD.

The downgraded ratings include the company’s $200 million senior secured revolver due 2017 to Caa1 (LGD 3) from B3 (LGD 3), $1.27 billion senior secured term loan due 2017 to Caa1 (LGD 3) from B3 (LGD 3) and $350 million senior unsecured notes due 2017 to Ca (LGD 5) from Caa3 (LGD 5).

The outlook is negative.

The downgrades reflect a weakening liquidity profile driven by expectations of negative free cash flow and concerns about further erosion in earnings, Moody’s said.

In conjunction with the ensuing elevated default risk, the highly leveraged balance sheet calls into question the sustainability of the company’s capital structure, the agency added.

Sequa’s highly leveraged balance sheet and weak cash flow profile heighten the company’s near-term default risk and increase the likelihood of a requisite restructuring event in the next 12- to 18-months, Moody’s said.

These negative considerations are partially mitigated by Sequa’s well-established market position within its niche engine repair- and parts-segment, the agency said.

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