Moody's cuts Paccor

Moody's Investors Service said it downgraded Paccor Holdings GmbH's corporate family rating to B3 from B2 and its probability of default rating to B3-PD from B2-PD.

Concurrently, Moody's lowered to B3 from B2 the rating on the company's €437 million, including the April 2021 €120 million add-on, guaranteed senior secured first-lien term loan B due 2025 and on its €50 million guaranteed senior secured revolving credit facility due 2024. Finally, Moody's trimmed to Caa2 from Caa1 the rating on the €70 million guaranteed senior secured second-lien term loan due 2026 issued by Paccor Packaging GmbH.

Proceeds from the €120 million add-on to the term loan B together with a €15 million cash equity injection from financial sponsor Lindsay Goldberg will be used to fund the acquisition of Miko Pac NV and to repay €20 million of drawings under its revolver.

"The downgrade to B3 primarily reflects the operating performance deviation relative to our expectations when we assigned the B2 rating, caused by a combination of lower volumes growth, delays in achieving the expected profitability improvement, and higher than anticipated restructuring costs. More recently, the deviation was largely driven by the impact of the coronavirus pandemic. Paccor's leverage, which was already high for the B2 rating category, has further deteriorated in 2020, while its free cash flow remained negative," said Donatella Maso, a Moody's vice president, senior analyst and lead analyst for Paccor, in a press release.

"While the acquisition of Miko Pac is marginally deleveraging and enhances the group's scale and diversification, it does not fully offset Paccor's weak credit metrics and exposes the company to execution risks in the integration of this asset," added Maso.

The outlook is stable.

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