S&P cuts City Brewing

S&P said it lowered the ratings on City Brewing Co. LLC and its $850 million term loan to B from B+, citing its underperforming the agency’s forecast mostly on weaker-than-expected demand for hard seltzers.

“While the company is onboarding new customers in other high-growth categories such as ready-to-drink (RTD) spirits and functional energy drinks, we do not expect it will restore volumes to previously forecast levels until after 2022,” the agency said in a press release.

“We estimate adjusted EBITDA will be down over 20% in 2021 from 2020 due to the weak second half volumes, with leverage increasing to about 7x (from the low-5x area at transaction close). This compares to our prior expectation that EBITDA would grow over 40% and leverage would improve to below 4x,” S&P added.

However, the agency said it does see demand for hard seltzers rebounding in 2022, though at lower levels.

The outlook is stable.

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