Moody's downgrades Ontex

Moody's Investors Service said it downgraded Ontex Group NV's corporate family rating to Ba3 from Ba2 and probability of default rating to Ba3-PD from Ba2-PD.

The outlook is negative.

The downgrades reflect Ontex's current weaker operating performance because of rising competition, negative foreign-currency impact and higher raw material costs, Moody's said.

The agency said it expects that any recovery will be slower than previously anticipated as the transformation plan announced will take time to bear fruits and will entail one-off costs and capital expenditure that will depress profits and cash flows in the next two years.

Moody's also noted the deterioration in Ontex's liquidity owing to the reduced headroom under financial covenants of its revolving credit facility.

The ratings continue to be supported by the company's leading market position in the production of retailer brand hygienic disposable products in Europe, the agency said, its good product and geographical diversification.

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