S&P shifts Vantage Specialty view to negative

S&P said it revised the outlook for Vantage Specialty Chemicals Inc. to negative from stable because it expects adequate liquidity through 2020, but continued weakness could lead to more negative rating actions over the next 12 months if debt leverage remains at unsustainable levels. The agency also affirmed the B- ratings on the company and its first-lien credit facility. The recovery rating remains 3, indicating an expectation of meaningful (50%-70%; rounded estimate: 50%) recovery if a payment default occurs.

In addition, S&P affirmed the CCC issue-level rating on the company’s second-lien term loan. The recovery rating remains 6, indicating S&P’s expectation of negligible (0%-10%; rounded estimate: 0%) recovery if a payment default occurs.

“The negative rating outlook on Vantage reflects our expectation that weighted average debt to EBITDA will remain at about 8x over the next 12 months fueled by weakened demand in personal care and industrial end markets; however, we expect the company to continue to generate positive free cash flow,” said S&P in a press release.

While credit metrics are currently above this level, the agency said it would expect gradual improvement after the very weak results for the fourth quarter of 2018 roll off the calculation. In addition, the company has seen CEO-level turnover and continues to operate below S&P’s previous expectations.

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