S&P ups A&V first-lien facilities

S&P said it raised the rating on the first-lien facilities of A&V Holdings Holdco LLC (AVI-SPL) to B+ from B and revised the recovery rating to 2 from 3. The borrower on the loan is A&V Holdings Midco LLC. S&P did not provide a specific reason for the higher rating.

The agency also affirmed AVI-SPL’s B issuer rating. “Free cash flow is under pressure this year because of a significant swing in working capital. The limited ability of critical components to complete and close projects led to a significant increase in accounts receivable and slower cash collection. AVI-SPL typically cannot collect final payment from customers until projects are complete. Additionally, AVI-SPL carries a higher inventory level than usual since the availability of some components can be unpredictable,” S&P said in a press release.

“We expect a modest improvement in the second half, but not enough to overcome the year-to-date declines. Our revised forecast for negative FOCF for fiscal 2022 is much weaker than the meaningful positive FOCF we forecasted previously. While the timing of improved availability of components is difficult to predict, we expect AVI-SPL's EBITDA margin and free cash flow will begin to recover once its supply chain improves,” S&P said.

The outlook is negative.

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