Fitch revises Ecore view to negative, cuts notes

Fitch Ratings said it revised Groupe Ecore Holding SAS’s outlook to negative from stable, while affirming the metals group’s long-term issuer default rating at B+. The agency also downgraded Ecore’s senior secured notes to B+ with a recovery rating RR4 from BB- with RR3.

“The negative outlook reflects weak trading in the current financial year, with its pricing strategy that locks in margins working for ferrous metals, but not for non-ferrous, batteries and other materials. This weaker market environment, together with the failure of Ecore to achieve its targeted €10 million of logistics efficiencies, has led us to forecast a materially higher funds from operations (FFO) adjusted gross leverage of 6.7x for 2019, before for it to only moderate towards 6x over the medium term. Those metrics exceed our negative guideline of 6.0x for the B+ rating,” Fitch said in a press release.

Citing a tough year for the steel sector in Europe, Fitch said it foresees some improvement next year and decided to revise the outlook instead of downgrading Ecore to give management time to adapt.

“The downgrade of the senior secured notes reflects the rebasing of our post-restructuring EBITDA to €49 million, following the removal of almost €10 million of estimated logistics efficiencies from our rating case,” Fitch said.

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