Moody's cuts Waste Pro, view to stable

Moody's Investors Service said it downgraded Waste Pro USA, Inc.'s ratings, including the corporate family rating to B3 from B2, the probability of default rating to B3-PD from B2-PD and the senior unsecured rating to Caa1 from B3. The outlook was changed to stable from negative.

The rating downgrades reflect Moody's forecast for continued weak earnings and cash flow which have underperformed due to escalating operating costs, namely labor and vehicle maintenance expenses and aggressive growth capital spending.

Debt levels continue to rise with negative free cash flow as a result of elevated capital expenditures (over 15% of revenues), pushing debt-to-EBITDA, including Moody's standard adjustments, towards 6x. With the anticipation of margins to remain challenged into 2021, the continuation of meaningfully negative free cash flow further constricts the company's ability to de-lever, the agency said.

The stable outlook includes expectations for modestly weaker-to-flat margins and for free cash flow to be negative but to start tracking towards a positive level over the next 12-18 months.

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