S&P downgrades AI Avocado loans to B

S&P said it revised its outlook on AI Avocado Holding BV (Unit4) to negative from stable and affirmed its B long-term corporate credit rating.

At the same time, the agency lowered its issue ratings on Unit4's existing senior secured debt, consisting of a €440 million term loan, a $30 million incremental facility and a €72 million revolving credit facility, to B from B+, and removed these ratings from CreditWatch with negative implications, where they were placed on June 14. The recovery rating was revised to 3 from 2.

In addition, S&P affirmed its B issue rating on the company's €230 million senior secured term loan issued in June 2016. The recovery rating on all the senior secured facilities is now 3, indicating an expectation of meaningful recovery in the lower half of the 50%-70% range in the event of a payment default.

AI Avocado posted weaker revenue growth and EBITDA than the agency expected in the first half of 2016. S&P said it sees a risk that the company’s current operating performance may not improve EBITDA margins and free operating cash flow (FOCF) enough to maintain the current rating.

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