Moody's rates SPX Flow B3

Moody's Investors Service said it assigned SPX Flow, Inc. a B3 corporate family rating and a B3-PD probability of default rating. The agency also assigned a B2 rating to the company's senior secured first-lien term loan and revolving credit facility and a Caa2 rating to the company's unsecured notes. The outlook is stable.

The ratings reflect SPX’s good scale and geographic diversification as a global manufacturer of commercial process-oriented products ranging from mixers and blenders to heat exchangers. SPX Flow's largest end market exposure is to the stable food and beverage industry and over one-third of the company's revenue is derived from high margin aftermarket sales, Moody’s said.

“However, SPX Flow has high pro forma debt to EBITDA resulting from the LBO of the company that Moody's anticipates will exceed 7.5 times at the end of 2022 on a Moody's adjusted basis. In addition, SPX Flow's free cash flow will be constrained by more than $100 million of annual interest expense,” the agency said in a press release.

The proceeds will help fund the acquisition of SPX Flow, Inc. by affiliates of Lone Star Funds for about $3.8 billion in cash.

“The stable outlook reflects Moody's expectation that SPX Flow's revenue will grow organically while margins strengthen, such that debt-to-EBITDA will improve to below seven times over the next 12-18 months,” the agency said.

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