S&P might cut Welbilt, rates facility BB-

S&P said it placed all of its ratings, including the BB- issuer credit rating, on Welbilt Inc. on CreditWatch with negative implications.

At the same time, the agency assigned a BB- issue-level rating and a 3 recovery rating to the company's proposed senior secured credit facility, which consists of a $400 million revolving credit facility due 2023 and $900 million term loan B due 2025.

The recovery rating indicates an expectation for meaningful recovery (50-70%; rounded estimate: 50%) in the event of a payment default.

“The CreditWatch with negative implications reflects the contraction of the cushion under the leverage covenant on Welbilt's senior secured credit facility,” S&P said in a news release.

“The cushion under the leverage covenant declined to just under 5% at June 30, 2018, due to step-downs on the leverage covenant, the acquisition of Crem in April 2018, and higher than expected raw material and freight costs.

“We could lower our ratings on Welbilt if the company is unable to obtain covenant relief through the proposed refinancing or through an amendment to its existing credit agreement in the next 90 days.”

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