S&P cuts Casablanca Global, on watch

S&P said it cut the ratings on Casablanca Global Intermediate Holdings LP (Apple Leisure Group) and its senior secured credit facility (consisting of a $175 million revolver due 2022 and a $950 million term loan due 2024) to B- from B and placed the rating on CreditWatch with negative implications. The recovery rating on the loan remains 3.

“ALG will likely generate negative cash flow from operations in 2019 and begin 2020 with lower cash balances than in the previous year. We lowered the rating because we expect the company to generate negative cash flow from operations in 2019. This is due to slower vacation bookings to the Dominican Republic, lower vacation bookings from Thomas Cook following its bankruptcy and liquidation, a change in the company’s customer payment terms, the company decision to reduce its air charter capacity, and higher-than-expected integration and other expenses,” said S&P in a press release.

The company sees generating enough cash flow in the fourth quarter to fully repay the revolver, S&P said.

S&P said it put the facility rating on CreditWatch until it can tell whether the negative cash flow drivers are temporary.

“Even if the company can reverse working capital cash outflows from 2019 and improve cash flow generation in 2020, we expect that our leverage measure of cash flow from operations to debt will still be below our 10% downgrade threshold at the previous B rating,” the agency said.

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