Moody’s lowers Affidea

Moody's Investors Service said it downgraded Celeste BidCo BV's (Affidea) corporate family rating to B3 from B2 and its probability of default rating to B3-PD from B2-PD. Concurrently, the agency lowered to B3 from B2 the instrument rating on Affidea's senior secured multicurrency revolving credit facility due 2029 and its senior secured term loan due 2029.

The revolver is being upsized to €165 million from €150 million and the senior secured term loan is also being upsized to €970 million from €770 million with the proceeds from the add-on expected to be used by the company to fund future bolt-on acquisitions. The outlook on all ratings has been changed to stable from negative.

“The downgrade action reflects an acceleration of debt-funded M&A transactions within a span of less than 12 months which reflects a more aggressive financial policy than Moody's had anticipated. Although the rating agency expects that the company will improve its financial metrics over the next 12-18 months after a spike in leverage at the closing of the proposed €200 million add-on,

“Moody's considers there to be execution risk and there is increased likelihood that free cash flow (FCF) generation and interest coverage will remain weaker than what is consistent with a B2 CFR beyond the next 12 to 18 months, due to large expansionary capital expenditures,” the agency said in a press release.

Though there are risks, Moody’s said it expects Affidea to lower its leverage to 6x over the next 12-18 months from an expected 7.7x from the term loan increase.

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