S&P lowers AI Aqua to negative

S&P said it affirmed the B corporate credit rating on AI Aqua Sarl and revised the outlook to negative from stable.

The agency also said it affirmed the B rating with a recovery rating of 3 on the company's senior secured facility consisting of an upsized $115 million revolver due 2021 and $741 million (outstanding) first-lien term loan due 2023.

The 3 recovery rating on the company's first-lien debt indicates 50% to 70% expected default recovery.

S&P also said it affirmed the CCC+ rating with 6 recovery rating to the company's $236 million outstanding second-lien term loan due 2024.

The 6 recovery rating indicates 0 to 10% expected default recovery.

The agency said it expects the company to have $1.1 billion in funded debt at the close of the transaction.

The outlook revision reflects the higher-than-expected pro forma adjusted leverage of more than 8x following a string of acquisitions and weak cash flow generation, S&P said.

AI Aqua was formed in 2016 through a leveraged buyout of Culligan International, the agency noted.

The company has since pursued an aggressive expansion strategy by making several small tuck-in acquisitions, as well as larger ones, S&P said.

The company's cash flow generation also has been weak in light of its aggressive expansion strategy and S&P said it is uncertain on how long it will take for the company to improve its free cash flow generation to expected levels, possibly to higher than $50 million annually.

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