S&P downgrades Ecotone

S&P said it downgraded its ratings for Ecotone HoldCo III SAS and its €490 million term loan to CCC+ from B-. The loan’s 3 recovery rating is unchanged.

Ecotone’s profitability was significantly below the agency’s forecast expectations for 2022, and will likely be weaker than projected in 2023. “Price increases will only partially offset persistent high operating cost inflation and weak consumption trends in some of its product categories that are relatively expensive, and for which consumers might seek cheaper alternatives,” S&P said in a press release.

The agency said it forecasts Ecotone’s S&P Global Ratings-adjusted debt to EBITDA to stay elevated at 10.5x-11x in 2022 and 2023, versus the previous expectation of below 10x. “We also forecast negative free operating cash flow (FOCF) of €25 million-€30 million in 2022 and broadly breakeven in 2023, because of lower EBITDA, higher interest costs, and continued negative working capital movements.”

The outlook is stable.

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