Moody’s cuts Allied Universal

Moody’s Investors Service said it lowered Allied Universal Holdco LLC’s senior secured instruments to B3 from B2 and the senior unsecured instruments to Caa2 from Caa1.

The agency also downgraded the corporate family rating for Atlas Ontario LP (Allied Universal) to B3 and the probability of default rating to B3-PD. Moody’s concurrently revised the outlook to stable from negative.

“The ratings downgrade reflects persistently high leverage, Moody's expectation of negative levered free cash flow for this year and aggressive financial strategies that includes frequent debt-funded acquisitions. Moody's expects that despite solid revenue growth and stable margins, the company will likely continue to execute on debt-funded acquisitions that will cause debt-to-EBITDA leverage to remain above 7x over the next 12-18 months,” the agency said in a statement.

The stable outlook reflects expectations for low single-digit revenue increases and that EBITDA margins will be between 8.5% to 9%. “Free cash flow to debt will likely be negative for 2023 – working capital will be a usage of cash and high-interest costs also put pressure on cash flow,” Moody’s noted.

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