Moody’s views Sector Alarm negatively

Moody's Ratings said it revised the outlook for Sector Alarm Holding AS to negative from stable and affirmed the B3 corporate family rating, B3-PD probability of default rating and the B3 rating of the senior secured bank credit facilities.

The negative outlook reflects the company’s below-target level results in Northern Europe on customer attrition and additions in 2023, its liquidity reserves which are expected to decline given the company’s capital expenditures needs and its €100 million revolving credit facility, of which €46 million is drawn as of December, nearing maturity in June 2025, which the agency said it expects will be refinanced on time.

"While we expect the company's gross leverage (Moody's adjusted) to reduce to below 7x in 2024 from 9.2x in 2023, its free cash flow is likely to remain materially negative over the next 12 months and the company will need to rely on its RCF to fund its cash requirements," said Gunjan Dixit, a Moody's vice president, senior credit officer and lead analyst for Sector Alarm, in a press release.

"Shareholders' have injected NOK 500 million of equity in 2023 to restore liquidity, however, more equity support will be needed in our view, for the company to comfortably continue with its capex-intensive expansion plan and achieve improved credit metrics over the next 12-24 months," Dixit added.”

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