Moody’s changes Wella outlook to stable

Moody’s Investors Service said it revised its outlook for Wella Co. (Rainbow UK MidCo 2 Ltd.) to stable from positive and affirmed its B2 ratings.

The agency also affirmed the B2 guaranteed senior secured bank credit facility ratings of the $1.945 billion equivalent term loan B issued by Rainbow Finco Sarl and the $348 million revolving credit facility borrowed by Wella US Operations LLC and co-borrowed by Rainbow UK Bidco Ltd. and Wella Treasury Ltd.

“The change of outlook to stable from positive reflects Moody's expectation that the company will continue to incur substantial one-off transformation costs over the next two years, which will constrain deleveraging, from a current Moody's-adjusted gross leverage of 6.1x, and limit cash generation,” the agency said in a press release.

The agency said it forecasts Moody's-adjusted EBITDA to be roughly flat in fiscal 2024 at around $350 million, including about $100 million of one-time expenses, before improving towards $400 million in fiscal 2025, from lower one-off expenses and ongoing growth in underlying earnings.

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