S&P downgrades Arxada

S&P said it lowered its ratings on Herens Midco Sarl (Arxada) and its senior secured debt to B- from B. The agency also trimmed Arxada’s €460 million of senior unsecured notes to CCC from CCC+. The 3 recovery rating on the senior secured debt is unchanged, indicating meaningful (50%-70%; rounded estimate: 60%) recovery in default, and the 6 recovery rating, with recovery prospects of 0%-10% (rounded estimate: 0%) is also unchanged.

“We forecast Arxada's adjusted debt-to-EBITDA ratio will remain elevated in 2022 and 2023 for longer than we previously anticipated. This is due to the higher transition costs following Arxada's carve-out from Lonza Group Ltd., which we include in our calculation of EBITDA. At the same time, we expect earnings growth to moderate in second half 2022 and into 2023, due to the weakening macroeconomic conditions,” S&P said in a press release.

The agency said it estimates Arxada’s adjusted leverage in 2023 will come in at 7.5x-8x. “This is higher than the 5x-7x that we view as commensurate with a B rating.”

The outlook is stable.

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