Moody's downgrades Deoleo

Moody's Investors Service said it downgraded the corporate family rating of Deoleo SA to Ca from Caa1 and probability of default rating to Ca-PD from Caa1-PD.

Moody's also said it downgraded the ratings on the senior secured €460 million first-lien term loan due June 2021 to Ca from Caa1 and the €85 million first-lien revolving credit facility due June 2020 to Ca from Caa1, along with the the rating on the senior secured €55 million second-lien term loan due June 2022 to C from Caa3.

The outlook remains negative.

The downgrades reflect the increased likelihood that Deoleo will need to restructure its debt or request an extension of its debt maturities, which will result in losses for its financial creditors, Moody's said.

Such losses would qualify for a distressed-debt exchange, which Moody's said it considers a default.

Deoleo's operating performance during 2018 continued the downward trend started in 2014, the agency noted.

Moody's said it believes that Deoleo's capital structure is unsustainable and the slow and uncertain EBITDA recovery prospects suggest a very high likelihood of a balance sheet restructuring over the next 12- to 18-months.

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