Moody's cuts API Holdings III

Moody's Investors Service said it downgraded API Holdings III Corp.’s ratings, including the corporate family rating to Caa1 from B3 and the company's first-lien senior secured term loan and revolving credit facility to B3 from B2. The agency revised the outlook to negative from stable.

“The ratings downgrades follow the recurring decline in revenue and operating losses since 2019, which were compounded by continuing manufacturing challenges. The company's performance through 2021 and its elevated financial leverage are governance concerns under our ESG framework and contributed to today's rating downgrades,” the agency said in a press release.

The outlook mirrors the execution risk in the program to restore profitability and free cash flow generation under the new chief executive officer that joined the company in December.

Moody’s noted debt/EBITDA at Dec. 31 was above 20x, and there is the possibility of negative cash flow, especially in the first six of months of 2022.

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