S&P trims Heubach

S&P said it lowered its ratings for Heubach, its $610 million term loan due in 2029 and revolver to CCC+ from B-. The 3 recovery rating remains unchanged, indicating meaningful (50%-70%; rounded estimate: 60%) recovery in default.

“The downgrade reflects our expectation that adjusted EBITDA will remain negative in 2023, resulting in an unsustainable capital structure. The weakening in Heubach's credit metrics is largely due to a combination of two factors: the downturn in the pigments industry, which started in the second half of 2022 as a result of stagnant demand and customer destocking; and cost disadvantages given its mostly Europe-based production footprint. These effects led to a deterioration in the company's operating rates and margins,” S&P said in a statement.

The agency said it expects Heubach’s “adjusted EBITDA to remain negative in 2023. Though it does expect an improvement in 2024, the agency forecasts adjusted debt to EBITDA to be at about 12x.

The outlook is negative.

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