S&P cuts Hyster-Yale

S&P said it trimmed Hyster-Yale Materials Handling Inc.’s issuer rating to B from B+ and its senior secured debt to BB- from BB. The 1 recovery rating on the senior secured debt is unchanged. The ratings remain on CreditWatch, where the agency placed them with negative implication on Nov. 5.

“The downgrade of the company reflects the deterioration in credit metrics resulting from continued high-input cost inflation and a large backlog. The company's record backlog of about 99,000 units is growing because component availability disrupted production and shipments. The higher backlog has extended delivery lead times substantially, which has affected the company's ability to address material and freight cost inflation,” S&P said in a press release.

The agency noted Hyster-Yale is still building trucks booked under old pricing structures. Trucks booked priced above inflationary costs will not be built until the second half of 2022 due to the backlog. “As a result, the company is anticipating operating profit to be negative at least through the first half of 2022 because the company is unable to reprice a majority of orders already in the backlog,” S&P said.

The agency said it projects Hyster-Yale’s leverage to escalate over the near term and settle at about 8x by fiscal year-end 2022 because the company anticipates posting an operating profit in the second half of 2022.

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