Moody’s changes Artemis view downward

Moody’s Investors Service said it changed to negative from stable the outlook on Artemis Midco (UK) Ltd., the parent company of Partner in Pet Food, and its ratings. Moody’s also affirmed the company’s B2 corporate family rating, its B2-PD probability of default rating and the B2 guaranteed senior secured instrument ratings of the €275 million term loan B and the €62 million revolving credit facility borrowed by Artemis Acquisitions (UK) Ltd. The outlook on Artemis Acquisitions was also changed to negative from stable.

“The negative outlook reflects the delay in leverage reduction, because of weaker than expected EBITDA growth and cash flow generation, as well as modestly higher debt following the upsizing of the term loan B and the drawing under the revolver and overdraft lines,” said Lorenzo Re, a Moody’s vice president, senior analyst and lead analyst for PPF, in a press release.

Moody’s sees leverage staying high, well above 7x in 2019 (from 6.9x in 2018), and to trend towards 6x only in 2020, one year later than originally expected. This is because of weak cash flow generation in 2019, resulting from flattish EBITDA generation despite growth in revenues, and high capex, the agency said.

“PPF is compensating this shortfall in cash generation with additional debt, including higher overdraft utilization (€18 million as of September 2019 from €13 million as of end-2018) and drawings under the RCF (€18.5 million as of September 2019). The company recently increased the amount of its term-loan B by €10 million, with proceeds being used to paid down part of the RCF. Moody’s expects cash flow generation to be solid in the last quarter of 2019, owing to normal business seasonality, which should allow further reduction in the RCF drawing,” the agency said.

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